Actually, I realized I had read about the psychology of poverty before George Orwell, one of the greatest writers who ever lived, experienced poverty firsthand in the 1920s. “The essence of poverty,” he wrote back then, is that it “annihilates the future”. And he marveled at, quote, “How people take it for granted they have the right to preach at you and pray over you as soon as your income falls below a certain level.” Now, those words are every bit as resonant today.
The big question is, of course: What can be done? Modern economists have a few solutions up their sleeves. We could help the poor with their paperwork or send them a text message to remind them to pay their bills. This type of solution is hugely popular with modern politicians, mostly because, well, they cost next to nothing. These solutions are, I think, a symbol of this era in which we so often treat the symptoms, but ignore the underlying cause.
So I wonder: Why don’t we just change the context in which the poor live? Or, going back to our computer analogy: Why keep tinkering around with the software when we can easily solve the problem by installing some extra memory instead? At that point, Professor Shafir responded with a blank look.
And after a few seconds, he said, “Oh, I get it. You mean you want to just hand out more money to the poor to eradicate poverty. Uh, sure, that’d be great. But I’m afraid that brand of left-wing politics you’ve got in Amsterdam — it doesn’t exist in the States.” But is this really an old-fashioned, leftist idea? I remembered reading about an old plan — something that has been proposed by some of history’s leading thinkers.
The philosopher Thomas More first hinted at it in his book, “Utopia,” more than 500 years ago. And its proponents have spanned the spectrum from the left to the right, from the civil rights campaigner, Martin Luther King, to the economist Milton Friedman. And it’s an incredibly simple idea: basic income guarantee. What it is? Well, that’s easy. It’s a monthly grant, enough to pay for your basic needs: food, shelter, education.
It’s completely unconditional, so no one’s going to tell you what you have to do for it, and no one’s going to tell you what you have to do with it. The basic income is not a favor, but a right. There’s absolutely no stigma attached. So as I learned about the true nature of poverty, I couldn’t stop wondering: Is this the idea we’ve all been waiting for? Could it really be that simple?
And in the three years that followed, I read everything I could find about basic income. I researched the dozens of experiments that have been conducted all over the globe, and it didn’t take long before I stumbled upon a story of a town that had done it — had actually eradicated poverty.
But then nearly everyone forgot about it. This story starts in Dauphin, Canada. In 1974, everybody in this small town was guaranteed a basic income, ensuring that no one fell below the poverty line. At the start of the experiment, an army of researchers descended on the town. For four years, all went well.
But then a new government was voted into power, and the new Canadian cabinet saw little point to the expensive experiment. So when it became clear there was no money left to analyze the results, the researchers decided to pack their files away in some 2,000 boxes.
Twenty-five years went by, and then Evelyn Forget, a Canadian professor, found the records. For three years, she subjected the data to all manner of statistical analysis, and no matter what she tried, the results were the same every time: the experiment had been a resounding success.
Evelyn Forget discovered that the people in Dauphin had not only become richer but also smarter and healthier. The school performance of kids improved substantially. The hospitalization rate decreased by as much as 85%. Domestic violence incidents were down, as were mental health complaints. And people didn’t quit their jobs. The only ones who worked a little less were new mothers and students — who stayed in school longer. Similar results have since been found in countless other experiments around the globe, from the US to India.
So here’s what I’ve learned. When it comes to poverty, we, the rich, should stop pretending we know best. We should stop sending shoes and teddy bears to the poor, to people we have never met. And we should get rid of the vast industry of paternalistic bureaucrats when we could simply hand over their salaries to the poor they’re supposed to help.
Because, I mean, the great thing about money is that people can use it to buy things they need instead of things that self-appointed experts think they need. Just imagine how many brilliant scientists and entrepreneurs and writers, like George Orwell, are now withering away in scarcity. Imagine how much energy and talent we would unleash if we got rid of poverty once and for all.
I believe that a basic income would work like venture capital for the people. And we can’t afford not to do it, because poverty is hugely expensive. Just look at the cost of child poverty in the US, for example. It’s estimated at $500 billion each year, in terms of higher health care spending, higher dropout rates, and more crime. Now, this is an incredible waste of human potential.
But let’s talk about the elephant in the room. How could we ever afford a basic income guarantee? Well, it’s actually a lot cheaper than you may think. What they did in Dauphin is finance it with a negative income tax. This means that your income is topped up as soon as you fall below the poverty line. And in that scenario, according to our economists’ best estimates, for a net cost of 175 billion — a quarter of US military spending, one percent of GDP — you could lift all impoverished Americans above the poverty line.
You could actually eradicate poverty. Now, that should be our goal. The time for small thoughts and little nudges is past. I really believe that the time has come for radical new ideas, and basic income is so much more than just another policy. It is also a complete rethink of what work actually is.
And in that sense, it will not only free the poor, but also the rest of us. Nowadays, millions of people feel that their jobs have little meaning or significance. A recent poll among 230,000 employees in 142 countries found that only 13% of workers actually like their job.