I don't see how they would afford this. Rough approximations show that even giving $20 a month to India's 900 million adult population would mean an annual expenditure of 216 billion dollars, more than 4 times the country's annual defence budget. Where does all this money come from? Increased taxes from the middle class (so that they pay $40 to get $20)?
This is what I point out whenever BI is brought up as a possibility in the US. With 1/4 the population of India, higher GDP, and allowing for all the existing entitlement programs being retired, we can't afford it either. The math just doesn't work out.
Edit: Some grossly simplified numbers.
Assumptions: BI matches poverty level. Everyone gets BI (parents receive their children's payments until they reach majority). Family size is 3 (average household size is really 2.54 persons in the US)
US Population: 312 million, which is 104 million families (households). The Census dept. says poverty level for a family of 3 is $20,000, so that's what BI must match. This gives us annual BI payments of $2.08 trillion.
Savings from shuttered entitlement programs: Medicare, Medicaid, CHIP, ACA subsidies: $938 billion. EITC & CTC: $362 billion. Total savings is $1.3 trillion annually.
But what about Social Security (OASI/DI) with $888 billion in payments? Since that's a pay-it-forward program we can't end it suddenly (it'd be political suicide, in any case). It'd have to be tapered off in some fashion. The trust fund (Al Gore's "Lock Box") doesn't exist as a big pile of money to be tapped, as that has been turned into US-issued Treasury Bonds.
So there's a shortfall of about $810 billion each year. Could we tap into the money sent to the Pentagon? Yes, but that's "only" $610 billion and we'd have a military that isn't being paid and with increasingly obsolete equipment. Not a good situation.
The money comes from sacrificing existing entitlement programs, which might actually cost more.
Think about it like this in the US: Imagine giving everybody a basic income and eliminating minimum wage, social security, medicare, welfare, and so forth...
Naturally some people would become wealthier (paying down existing debts) and some people would become poorer (spending money more rapidly and increasing their debt burden), but these are personal decisions.
You can raise income taxes on the employed pay for UBI for the unemployed. Therefore, the cost would only be $20 * India's unemployed adult population, which is a lot less than 900 million.
After the recent Demonetization brouhaha, which led to over a 100 deaths[1], most of them from the lower strata of society, it makes sense for the current government to start off UBI whole heartedly, especially since they can tie in the entire demonetization/cashless economy/jan dhan etc. stories together. However, I sincerely hope that the execution is well planned, rather than hasty.
This article though seems to be a marketing report for BIEN. Remember that with a country as large as India, Government reports are many in number but very few schemes having national level adoption. I can think of numerous states that would support doling out sops for the poor instead of UBI.
Interesting times these are for the country. Let's hope sense prevails.
I'll take liberty to correct your perspective: A demonetization move that directly affected livelihood of billion Indians, with a possibility of large-scale riots, but ended with only 100 deaths. I don't see how it cannot be termed a success. Can you think of any major move that directly affected the entire country but did not end in large scale riots? If you need to understand what a "hasty decision" means take a look at the Partition of India, where only a small fraction of the entire populace was displaced but ended up causing up almost 2 million deaths by some estimates.
Have there been any studies on the impact to prices on staple foods?
Because if everyone can afford food and basic items for living, does that mean the prices for these items will go sky high? Especially as supply will be short of demand?
Why would demand for staple foods shoot up? Sure, there's some hunger in India, but AFAICT most people are already getting most of the calories they need. If anything, I would would think demand for basic staples would go down as people switch away from the cheapest of foods to better ones.
"Because if everyone can afford food and basic items for living", the economic collapse is unavoidable. How did we develop this notion that the economy can function well only when a portion of the population balances on the edge of starvation.
Someone please correct me if I'm wrong, but I seem to recall Indian colleagues telling me that the India government sets maximum prices for certain basic foodstuffs, such as rice or flour?
Price inflation of basic necessities is my major concern with BI schemes, I get the impression that noone really wants to discuss the other systems such as price fixing, and nationalisation of many services that would need to be deployed in parallel with basic income to prevent this from happening.
No. You need to understand the economics of commodities opposed to individualized goods for this to really make sense. Greater access to a commodity will often reduce its costs as it means greater consumption and increased market penetration to satisfy (and thus stabilize) its demand and thus development.
Every time UBI is brought up, vague arguments about inflation come up. However, I've never seen anyone cite economic literature that actually quantifies such an effect. It's just a claim justified by an understanding of economics 101. However: there's a reason why a study of economics doesn't end at the 101 level. Economics 101 is a grossly simplified toy facsimile of the actual capitalist economy.
There are professional economists who support UBI or at least experimenting with it. Am I supposed to believe that they never considered the vague and simplistic argument that can be posed with minimal effort in an Internet comment?
Because claiming that UBI will cause inflation is not justified by an understanding of Economics 101. Most basic economic theory will state that inflation is basically a monetary phenomenon. (Now, if you use monetary expansion to pay for the UBI, as the occasional person has suggested, then Econ 101 would suggest inflation, but that's true for any expenditure funded that way.)
Every basic income story has an inflation comment.
Think in terms of proportion of wealth helps. If a company issues new shares and gives it X(analogy to govt printing money), the overall dilution in value of share doesn't prevent that the wealth of X from going up. For instance, giving 100% new shares of a 10 million dollars company to X means each share has half of the old value, but X has nevertheless gained 5 million dollars.
Redistribution, as opposed to new money, would put even less stress.
Another argument for inflation, is the possibility that the poor are consuming non-elastic goods(ie supply doesnt increase with price), so lot of extra money effectively ends up with the sellers of these goods. But this is probably false and at least not obvious. It has to be shown why supply of goods that people consume is inelastic. Most likely redistribution would lead to poor gaining a larger share of the output produced in a year relative to the rich.
Note that there can be other potential arguments against basic income(wasting money in alcohol, alternatives like supplementing wage-income), but inflation doesnt directly make the case against it.
UBI as an idea needs testing. Theoretically it solves an immense number of social problems (homeless/poverty) while drastically reducing government size (signifcantly less administration).
There are also a number of behavioural assumptions that people are making that also need to be tested, primarily the assumption that people just won't work.
What I think you will find is that people will not be forced into virtual slavery working for a pittance just to survive any more. UBI will have a net benefit on society.
What UBI says about our monetary system and whether money is inherently just a way to control society is another matter.
Only really poor people will consume more. When those at the very low end of the income scale have, say, 100% more money through UBI (ignoring the actual value of that money, just sticking to the numbers for now), then high income earners would have 50% more, or 10% more or just 1% more, depending on their earned income. Relative to the high earning class, the poor will be able to bid more, inflation or not. A shift in resource allocation, "diverting water from golf courses to subsistence farmers", to paint a grossly simplified picture. Prices will rise, but not by the same amount as total income.
(theoretically there might be a few exceptions, e.g. goods that are not very flexible in supply and target a very specific low income demographic)
Because no money is being created, it's being reallocated from other people, so it doesn't directly affect the money supply.
The recipients are more likely to spend it, which creates some demand (and thus inflation), but it should still be less than the increase in spending power it provides them.
This thread is political, just that it is Indian politics instead of American politics being discussed. An opportunity for American readers to get a first hand idea of what it feels like to have long threads of inane politically motivated discussion which doesnt' make much sense to readers from other countries ;-)
Most of my friends who are communists are calling this "class control" and I'm laughing at them because they are getting what they wanted just without mass riots and murders of the rich.
Once in awhile I get annoyed about the fact that I have no real
privacy. No where I can go and not be registered. I know that,
somewhere, everything I do, think and dream of is recorded. I
just hope that nobody will use it against me.
Not exactly sure what comrade Auken has in mind when in passing she mentions her /thoughts and dreams/ are being "recorded". Possibly after cash-less society and basic income (provided by All-Knowing Mommy State) the "citizens" must submit to Leninist self-criticism sessions. Have no idea what she has in mind by dreams being recorded.
I think they are using India to beta-test their glorious plans for our future.
[+] [-] gyey|9 years ago|reply
[+] [-] chiph|9 years ago|reply
Edit: Some grossly simplified numbers.
Assumptions: BI matches poverty level. Everyone gets BI (parents receive their children's payments until they reach majority). Family size is 3 (average household size is really 2.54 persons in the US)
US Population: 312 million, which is 104 million families (households). The Census dept. says poverty level for a family of 3 is $20,000, so that's what BI must match. This gives us annual BI payments of $2.08 trillion.
Savings from shuttered entitlement programs: Medicare, Medicaid, CHIP, ACA subsidies: $938 billion. EITC & CTC: $362 billion. Total savings is $1.3 trillion annually.
But what about Social Security (OASI/DI) with $888 billion in payments? Since that's a pay-it-forward program we can't end it suddenly (it'd be political suicide, in any case). It'd have to be tapered off in some fashion. The trust fund (Al Gore's "Lock Box") doesn't exist as a big pile of money to be tapped, as that has been turned into US-issued Treasury Bonds.
So there's a shortfall of about $810 billion each year. Could we tap into the money sent to the Pentagon? Yes, but that's "only" $610 billion and we'd have a military that isn't being paid and with increasingly obsolete equipment. Not a good situation.
[+] [-] austincheney|9 years ago|reply
Think about it like this in the US: Imagine giving everybody a basic income and eliminating minimum wage, social security, medicare, welfare, and so forth...
Naturally some people would become wealthier (paying down existing debts) and some people would become poorer (spending money more rapidly and increasing their debt burden), but these are personal decisions.
[+] [-] jganetsk|9 years ago|reply
[+] [-] IslaDeEncanta|9 years ago|reply
[+] [-] madmax108|9 years ago|reply
This article though seems to be a marketing report for BIEN. Remember that with a country as large as India, Government reports are many in number but very few schemes having national level adoption. I can think of numerous states that would support doling out sops for the poor instead of UBI.
Interesting times these are for the country. Let's hope sense prevails.
[1] http://www.dnaindia.com/india/report-demonetization-governme...
[+] [-] shripadk|9 years ago|reply
[+] [-] nashashmi|9 years ago|reply
Because if everyone can afford food and basic items for living, does that mean the prices for these items will go sky high? Especially as supply will be short of demand?
[+] [-] bryanlarsen|9 years ago|reply
[+] [-] perfunctory|9 years ago|reply
[+] [-] drabiega|9 years ago|reply
[+] [-] GordonS|9 years ago|reply
[+] [-] probablybroken|9 years ago|reply
[+] [-] austincheney|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] danharaj|9 years ago|reply
There are professional economists who support UBI or at least experimenting with it. Am I supposed to believe that they never considered the vague and simplistic argument that can be posed with minimal effort in an Internet comment?
[+] [-] snrplfth|9 years ago|reply
[+] [-] a_imho|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] sharemywin|9 years ago|reply
[+] [-] enugu|9 years ago|reply
Think in terms of proportion of wealth helps. If a company issues new shares and gives it X(analogy to govt printing money), the overall dilution in value of share doesn't prevent that the wealth of X from going up. For instance, giving 100% new shares of a 10 million dollars company to X means each share has half of the old value, but X has nevertheless gained 5 million dollars.
Redistribution, as opposed to new money, would put even less stress.
Another argument for inflation, is the possibility that the poor are consuming non-elastic goods(ie supply doesnt increase with price), so lot of extra money effectively ends up with the sellers of these goods. But this is probably false and at least not obvious. It has to be shown why supply of goods that people consume is inelastic. Most likely redistribution would lead to poor gaining a larger share of the output produced in a year relative to the rich.
Note that there can be other potential arguments against basic income(wasting money in alcohol, alternatives like supplementing wage-income), but inflation doesnt directly make the case against it.
[+] [-] awjr|9 years ago|reply
There are also a number of behavioural assumptions that people are making that also need to be tested, primarily the assumption that people just won't work.
What I think you will find is that people will not be forced into virtual slavery working for a pittance just to survive any more. UBI will have a net benefit on society.
What UBI says about our monetary system and whether money is inherently just a way to control society is another matter.
[+] [-] usrusr|9 years ago|reply
(theoretically there might be a few exceptions, e.g. goods that are not very flexible in supply and target a very specific low income demographic)
[+] [-] aninhumer|9 years ago|reply
The recipients are more likely to spend it, which creates some demand (and thus inflation), but it should still be less than the increase in spending power it provides them.
[+] [-] tdb7893|9 years ago|reply
[+] [-] 234dd57d2c8db|9 years ago|reply
[deleted]
[+] [-] plinkplonk|9 years ago|reply
[+] [-] dovdovdov|9 years ago|reply
I guess shadow powers don't want global riot in 10-20 years.
[+] [-] gravypod|9 years ago|reply
[+] [-] eternalban|9 years ago|reply
I think they are using India to beta-test their glorious plans for our future.
[+] [-] djschnei|9 years ago|reply
[+] [-] known|9 years ago|reply
[+] [-] known|9 years ago|reply
[+] [-] grondilu|9 years ago|reply
[+] [-] azizsaya|9 years ago|reply