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Make-work schemes need to come back

LiveMint logoLiveMint 17-08-2017 Jared Dillian

Many assume that universal basic income will be one of Mark Zuckerberg’s policy platforms when he runs for president. The volume has been turned up to 11 on such speculation since his Harvard commencement speech back in May. In summary, he said people think our labour force has been altered structurally by automation, that some people will be permanently left out of it, and that we should explore ideas like paying everyone a subsistence-level basic income. If people want to earn more, they can.

Libertarians like universal basic income as an alternative to other welfare benefits, such as food stamps, because it doesn’t phase out at higher levels of income: When a person earns too much money to receive food stamps, they effectively face a very high marginal rate of tax, which destroys the incentive. This is part of the reason many conservatives like the earned income tax credit.

I identify as a libertarian, and I do not like the idea of universal basic income. Its advocates fundamentally misunderstand human nature. What they do not realize about human beings is that for the vast majority of them, a subsistence level of income is enough—and those advocates are blind to the corrosive effects that widespread idleness would have on society. If you give people money for doing nothing, they will probably do nothing.

We do not fully understand the implications of a society in which a significant part of the population does not work, although we are starting to get the idea. Journalists have been documenting this phenomenon in dribs and drabs over the last few years.

The best piece on the subject came from The Washington Post’s Stephanie McCrummen, who described in heartbreaking detail the mobile home where Dylann Roof spent his hours playing video games before driving to Charleston to commit mass murder.

A huge controlled experiment on basic income has already been run—in Saudi Arabia, where most of the population enjoys the dividends of the country’s oil wealth. Saudi Arabia has found that idleness leads to more political extremism, not less.

We have a smaller version of that controlled experiment in the US—for example, the able-bodied workers who have obtained social security disability insurance payments and are willing to stay at home for a piddling amount of money.

If you believe that a basic income is necessary, then you accept that something is structurally different about today’s economy, even compared to 10 or 20 years ago, where free-market capitalism can no longer provide employment to just about everyone who wants it, subject to economic cycles.

It certainly would seem that less skilled and unskilled workers are the ones who have found themselves without work, with trends leaning towards more automation and more joblessness. It’s a profoundly pessimistic view of capitalism.

A few centuries of free markets have shown that with each technological disruption, the economy adjusts (sometimes with difficulty), and jobs that are lost are gained somewhere else. This has been going on, without interruption, since the Industrial Revolution.

So let’s say you do believe that the economy is structurally different now, that unskilled labour is gone forever, and no amount of educational improvement can help. You are prepared to embark on a programme of universal basic income. But instead of paying people to do nothing, wouldn’t you rather pay them to do something? Given what we think we know about what indolence does to the human psyche, wouldn’t you want to give people meaningful work? Wouldn’t a New Deal-style make-work programme be superior to institutionalized loafing?

It might seem counter to my beliefs, but an agency like the Civilian Conservation Corps (CCC)— which operated from 1933-42 and provided unskilled manual labour jobs to young men—would be superior to universal basic income. In our highly individualistic society that is mostly hostile to volunteerism and national service, the idea of young men and women putting on uniforms and living in camps, watching propaganda videos at night, might sound like a pretty terrible idea. But is it worse than becoming addicted to painkillers or spending hours playing Call Of Duty?

A revived CCC would be engaged in the sort of work that doesn’t provide a lot of economic value —structural improvements, landscaping, fire prevention, etc. But that’s not the point. The point is to provide meaningful work to people who would otherwise have none.

The devil is in the details—how much would you pay the workers? What criteria would you impose? But the overarching principle is that people need work that is worthwhile, for practical and psychological reasons. If we hand out cash to anyone who can fog a mirror, I figure we are about two generations away from revolution.

It was nice of Zuckerberg to tour the country milking cows and eating sausages, but I gather he didn’t spend a lot of time with people whose cases would be considered hopeless. There is a lot of that around where I live, in South Carolina, or where my brother lives in post-industrial Ohio. I’m not sure how you could visit these places, talk to the residents, and come to the conclusion that what people really need is more leisure time.

Jared Dillian is editor and publisher of The Daily Dirtnap and investment strategist at Mauldin Economics.

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