On COVID-19, Crisis, and Basic Income
When the Coronavirus broke out last year in China, it seemed so far away. My wife and I had plans to move to Shanghai in April for two months and I would work from our offices there. We optimistically hoped that China would get the disease under control in January and February and it would all be back to normal in April. Today, in China, business and life are returning to normal and there is a good chance that on April 1st, 2020 it will be business as usual with the streets of Shanghai filled with people moving at a frenetic high and the delicious aromas of street food in the air.
While China is getting back up and running, the rest of the world is in lock-down and chaos. This turn of events is both surprising and highly predictable. It is surprising and disappointing that despite warnings we did not prepare better. The way I look at it, “Western Society” had 100 years to prepare for this Pandemic. Just over 100 years ago, the Spanish flu swept through the world in 1918-1920 and killed millions and taught us valuable lessons. Since then we have developed reams of people trained in advanced risk planning, risk assessment, economists, epidemiologists, and a variety of other professions. We built international organizations such as the WHO. We had numerous recent warnings and practice sessions for a pandemic with SARS, MERS and EBOLA. Despite all this knowledge and experience, western governments have failed miserably in their job to protect their people and their economies. The difference in the actions of China and other countries is often attributed their centralized government with strong powers and a population that is used to following orders. This line of argument was recently highlighted in the NY Times and other publications. While there is an element of truth, it is a gross oversimplification and it is an abdication of our responsibility to maintain organizations, systems and plans for a potential pandemic. If there is one conclusion I can draw from the COVID chaos so far, it is that knowledge is not enough. Governments must actively plan, practice and coordinate their various institutions and governments to ensure they can act swiftly when a new virus emerges. I would suspect that most Western countries felt they were prepared for a pandemic, but our overconfidence has led us down the path we are now on.
While the ineptitude of the west is unpleasant, it is even more remarkable that we are surprised by this crisis. Frankly, I am frustrated in my own failure to see this coming and to sell off my stock portfolio! In our globalized and connected world it should have been clear that a virus that infected tens of thousands of people in China would eventually seep out of the country and contaminate the world. We knew that the virus was fairly contagious, certainly more so than SARS, and yet we kept plodding along as if China was hermetically sealed. Some countries limited flights to China, but we all know that it only takes one person to contaminate a very, very large population. There are certainly mountains of academic papers on humanity’s collective failure to see large events coming when they are perfectly clear in hindsight. Sure, hindsight might be 20/20, but with our experts and highly educated populations, why were more people not ringing massive alarm bells in January 2020? Anyways, moving along…
Perception of the Economy & Money
There will certainly be some positive outcomes from this crisis. First and foremost, people are starting to understand how the economy is in fact just a bunch of people transferring money to each other for services. One person’s expenses is another person’s income. Wow! Holy Moly! Who knew?
If we shut down one part of the economy the rest comes to a really abrupt halt, all the way down the line. It’s almost as if we are on a moving train with interconnected parts! One surprise, to some at least, is how tightly wound the economy is. A month without revenue – for people or businesses – is often more than they can handle. There is very little buffer in our society which still has a majority of people living paycheck to paycheck and many businesses in a similar situation. Hopefully this crisis will teach us the importance of planning for the future, helping the less fortunate and building businesses, institutions, people and family that can withstand longer periods of rationing. Beyond preparation and coordination, I am optimistic that this crisis will change our perception of money and what the government can do when it wants to.
To try and prevent or mitigate the current train crash, certain governments, such as Canada and the United States, are implementing a form of basic income for those hit by this crisis. Starting in April Canada will offer $2,000 per month to all residents who lost their job or were affected by the crisis. The Canadian government, after a successful petition by UBI Works (with which I am involved), consolidated a variety of programs into a central program that will start April 6th, and begin distributing $2,000 checks by April 16th. This basic income will be critical to stabilizing the economy and keeping people going. While $2,000 is not enough to live on for some, it is a good start. This relatively unconditional monetary issuance will set a new standard for what is possible and I am optimistic that it will break our traditional perception of what government can do. The Globe and Mail outlines how the program is in fact a significant departure from traditional employment insurance programs. Perhaps this emergency program will be the breach in the dam of complex government programs.
I have been active in the basic income movement for nearly seven years and in that time I have seen a variety of advocacy approaches. My take has always been that basic income is much more revolutionary than people realize. It is not simply a transfer of money, it is a transfer of power. By issuing a basic income to all citizens, you are reducing the influence of the rich and eroding their money and power. The consequence is a more even playing field where a larger swath of society have a fair shot in life. However, because basic income takes something away from powerful people it was always going to be hard to implement. My thinking back then and today is that the only way to institute a basic income was during a period of economic crisis. During a time of social and economic upheaval, government and the people could make this radical change without giving the opposition the time to organize a fight. Naomi Klein has written a lot about disaster capitalism where governments privatize industry during times of upheaval. I do think that disaster politics can go in the other direction to, progressive ideas can become mainstream when a crisis takes place. Milton Friedman wrote, “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.” The key is to take the temporary and conditional cash transfer Trudeau has created and turn it into an actual permanent and universal basic income. The $2,000 transfer is a key step towards an actual universal and unconditional transfer of wealth to all members of society.
Now that the program is in place UBI Works is pushing for this basic income to become universal and permanent. A real basic income would allow the economy and society to be far better prepared for the next crisis. A basic income would create the buffer that society needs in a time of crisis. It would set a foundation under the feet of everyone and allow us to withstand the future storms that are bound to hit us.Published on March 30, 2020