Obama and Bezos Could Make Basic Income Work
(Bloomberg Opinion) -- This week, former U.S. president Barack Obama tentatively endorsed the idea of a universal basic income. The fortune of another American, Amazon founder Jeff Bezos, reached $150 billion. Could Bezos and his peers make the UBI dream work?
“It’s not just money that a job provides,” Obama said in his Nelson Mandela Lecture in Johannesburg on Tuesday, after mentioning the threat new technology poses to jobs. “It provides dignity and structure and a sense of place and a sense of purpose. So we’re going to have to consider new ways of thinking about these problems, like a universal income, review of our workweek, how we retrain our young people, how we make everybody an entrepreneur at some level.”
Obama has mentioned the UBI before, in a 2016 Wired interview, as an idea that would need broad-based support to work. But perhaps consensus among the wealthiest 0.01 percent would be a step in the right direction.
Legislating to make the wealthy or the companies from which they derive their wealth pay more taxes wouldn’t do the trick. Amazon didn’t pay any U.S. federal taxes last year, and it’s been good at minimizing tax payments in Europe, too. Besides, taking away a bigger portion of entrepreneurs’ or businesses’ income would, of course, have a negative effect on growth and innovation.
Yanis Varoufakis, the former Greek finance minister and a fiery leftist, has proposed a different solution. He suggests funding a universal basic income through “a universal right to capital income.” Varoufakis wrote in 2016:
A common myth, promoted by the rich, is that wealth is produced individually before it is collectivized by the state, through taxation. In fact, wealth was always produced collectively and privatized by those with the power to do it: the propertied class. Farmland and seeds, pre-modern forms of capital, were collectively developed through generations of peasant endeavor that landlords appropriated by stealth. Today, every smartphone comprises components developed by some government grant, or through the commons of pooled ideas, for which no dividends have ever been paid to society.
Varoufakis proposed “legislation requiring that a percentage of capital stock (shares) from every initial public offering (IPO) be channeled into a Commons Capital Depository, with the associated dividends funding a universal basic dividend (UBD).”
Some governments have even managed to put enough assets together to make a UBI funded with capital income workable if they wanted to. For example, the Norwegian sovereign wealth fund is currently worth 8.4 trillion Norwegian kroner ($1.033 trillion). It has generated annual returns of 5.9 percent over the last 20 years. If it stopped accumulating cash and kept making that income, paying it out every year to the 5.3 million Norwegians, each of them would receive some $11,400 a year, about half of the poverty line but well above what’s needed for survival. Only small parties support a UBI in Norway, though, and the nation keeps saving for a rainy day.
In the U.S., it would be virtually impossible to create a fund of the necessary size, however. Paying out $6,000 a year (half the poverty line income) to every one of 327 million people living in the U.S. would require a $33 trillion fund making returns like those of the Norwegian one. The total net worth of all U.S. households stands at about $100 trillion. According to the 2015 research by UC Berkeley’s Emmanuel Saez and Gabriel Zucman, the wealthiest 0.1 percent of Americans hold some 22 percent of the nation’s wealth. Even a mass-scale expropriation, which would be undesirable and unpopular, wouldn’t be enough — and that’s before one even considers the difficulty of turning the giant fund’s returns into cash.
There is, however, something to be said for getting tech billionaires (eight out of 10 wealthiest Americans according to Forbes made their fortunes in tech) to put some of their assets into a fund that would finance large-scale UBI experiments in specific counties or even small states.
The logic here is that tech companies are the ones working to eliminate routine jobs. Amazon, for example, is testing convenience stores without cashiers and leading an onslaught on bricks-and-mortar retailers (while at the same time boosting the number of warehouse workers whose tasks cannot be automated yet). So it could be argued that it’s up to them to pay for the social cost of innovation. A “robot tax,” as some UBI proponents have suggested, wouldn’t work any better than higher personal taxes: Innovation would merely shift to jurisdictions where the tax doesn’t exist. Putting a share of assets into a UBI fund — perhaps even as a loan rather than a grant — wouldn’t lead to any such adverse consequences.
Most of Bezos’s wealth ($145.55 billion of $152.2 billion on Wednesday, according to Bloomberg Billionaires) is tied up in Amazon stock. These are resources Bezos cannot use in full; there’s no way he can borrow money against his entire holdings. Essentially, he’s just sitting on much of his enormous fortune. But a fund with stakes in Amazon and other companies owned by the top 0.01 percent would likely be able to put together enough money for some large-scale UBI tests.
It would cost $8.5 billion to pay a poverty level income for a year to everyone in Seattle, Amazon’s hometown.
Small UBI experiments, like the soon-to-be ended Finnish trial involving 2,000 people or Chicago’s proposed one for 1,000 families, are fine, but if testing universal acceptance is the goal, scale is necessary to convince a large nation like the U.S. or at least individual states. Ultimately, Varoufakis’s idea can’t work for such big countries. People would need to agree to pay much higher taxes for UBI to become a reality; it’s hard to imagine an America where that’s popular. But tests of the idea at some scale would at least resolve the never-ending debate about whether handing out money to people, regardless of what they do to earn it, is a bad idea.
Bezos is reportedly a basic income advocate. Other tech entrepreneurs have also expressed interest in the idea. Perhaps someone with Obama’s moral authority could organize them to form a specialized fund to experiment with it. Without some heavy-hitters behind the venture, there’s no way to get any closure on an idea that intrigues the modern left but also seems impractical to many.
Leonid Bershidsky is a Bloomberg Opinion columnist covering European politics and business. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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