Exploring a compelling case for why a basic income grant would benefit all
Author and researcher Hein Marais firmly believes in the merits of a universal grant and delivers a convincing argument for it in his recent book, “In the Balance”. That said, the challenges are immense.
Two anecdotes from my homeland of Canada shed light on the wider debates around the basic income grant (BIG) and how the idea is gaining traction in surprising places.
One involves the western Canadian province of Manitoba and an experiment that Hein Marais says “became part of social policy folklore subsequently”. Known as the Mincome Programme, it paid out a supplemental income of CAN$19,500 per year per four-person family to 1,000 low-income families in the town of Dauphin.
This ran from 1974 to 1979, when Canada’s Conservative Party briefly assumed power and pulled the plug on the scheme without bothering to examine the outcomes.
A few years later an economist did analyse the data, and the results were striking. Among other effects, “numerous health and other indicators … improved among the recipients of the income payment. A larger proportion of children in recipient families had completed Grade 12 when compared with those living in similar towns in the province. Hospital visits and admissions had declined, especially for mental health diagnoses, accidents and injuries, and reports of domestic violence had decreased.
“Employment rates had stayed steady throughout the five-year trial, except among new mothers (who were able to spend more time with their children) and teenagers (who were able to give up part-time jobs and focus on school work),” Marais writes.
“All these effects,” he further notes, “disappeared when the experiment ended.”
The other Canadian example (which Marais does not mention) involves a former prime minister from the same Conservative Party that ended the Mincome Programme. Brian Mulroney — a creature of Canada’s corporate culture not famed for his compassion — has come out swinging in favour of a BIG.
“Governments, prime ministers have to think BIG now,” Mulroney said in a video posted on Twitter on 14 February.
Mulroney goes on to explain that the Covid-19 pandemic and the economic dislocations it wrought focused his mind on the issue, and he cites proposals from his former chief of staff, Hugh Segal, who has been pushing the idea for decades.
The point here is that the idea of a BIG is gaining a foothold in unexpected places, driven by disruptive developments over the past few decades. The idea of a BIG has emerged on the surface, and Marais does an admirable job of charting this flow.
In clinical detail, he dissects the main trends that have informed the debate: the crisis of waged labour, the BIG’s attractions and dissents, and mechanisms for financing such a radical policy measure. On this front alone Marais has done a service, and among other things, it is a useful and readable primer on most of the issues related to the concept of a BIG, as well as a window on recent trends in economic thought.
On the question of financing, there is a range of ideas. For this reviewer, the most appealing among the ones that Marais highlights is a financial transactions tax (FTT). It would be applied to the transfer of ownership of assets such as equities, bonds and foreign currencies.
It’s not a novel tool, and at least 15 countries use an FTT, or did until recently, including the UK, India, Brazil and SA.
In SA’s case, a limited FTT came into effect in 2008 in the form of a 0.25% levy on the purchase and transfer of securities.
“The tax has two major potential benefits: it can discourage financial market speculation by raising the costs of speculators, and it can be a substantial source of additional government revenues,” Marais writes.
Part of the attraction of this approach is that the financial sector in many ways is becoming increasingly detached from the wider economy, accounting for a growing percentage of GDP unrelated to critical areas such as job creation or even productive investment.
Marais notes that the main critiques of an FTT are that it is vulnerable to tax avoidance through offshoring and that it could discourage portfolio flows, which remain vital to the SA economy, in which financial markets are still liquid and sophisticated, even if they don’t always mirror — except in a distorted way — what is happening on the ground.
Still, the SA Revenue Service is hardly incapable, and reducing the economy’s reliance on volatile portfolio flows, in the long run, may not be a bad thing — foreign direct investment is far more crucial and durable. And if applied appropriately and ring-fenced for the purpose of a BIG, an FTT seems to this reviewer as not representing a massive disincentive to financial markets investment — a sector of the economy that should give back more.
Ultimately, the appeal of a BIG in the SA context is that even badly needed economic growth is not a panacea for job creation, especially in the face of the forces of automation and digitisation.
There is the Fourth Industrial Revolution and all that jazz, and SA’s low-skilled and poorly educated workforce is ill-equipped to prosper from such trends.
That doesn’t mean that job creation or economic growth are not worthy policy goals, but Marais’s wider point that they have not delivered the goods is indisputable.
Even much faster rates of economic growth in SA are not going to bring unemployment rates down to, say, Canadian levels, which are currently close to record lows at 5% — and yet even in that environment, they have the likes of a former and deeply unpopular Conservative Party prime minister calling for a BIG.
If BIG has surprising supporters in Canada, surely its utility in SA should be gin clear.
The old adage about “hand-outs” to lazy people doesn’t apply, or is certainly inappropriate in a 21st-century economy that has the most glaring income disparities on the planet, thanks to the legacies of apartheid and the ANC’s bungling and looting.
As Marais notes, in such an unfair setting, a BIG empowers SA’s underclass to quit jobs or turn down dangerous or exploitative work. “The ability to decline waged work can help reset the balance of power between workers and employers,” he writes. “Not merely an adjustment or an expansion of the existing social welfare order, it can be a quantitatively different intervention that breaks with the waged work-centric model of the old order, its paternalist frame and its patriarchal slant.”
Most people will still aspire for more than what a BIG promises, though it does provide a safety net with a tight enough mesh to hopefully prevent the poorest from falling into the economic currents below and empower them from being swept away. And if it’s universal, even the middle class will likely spend it, even if just on some meals out, adding to demand in the economy. Some may even devote it to savings, which is no bad thing.
One way that Marais frames it is as a “citizens’ dividend”. The ultimate costs of such a dividend, though, seem harder than he envisions for the SA economy to absorb. That is not to say that he skirts over the decay of the SA state and its capabilities, or incapabilities.
But he sees it as “reparable”, which ultimately every South African should hold out hope for, as the alternatives include a descent into a Zimbabwean-style nightmare. But “reparable” gets tougher when things are not maintained, as the case of Eskom highlights.
Still, a BIG is an attractive policy option in SA, and this reviewer is more sold on its merits having digested Marais’s work. However, it remains too big a policy for SA’s body politic to digest without throwing it into a steaming heap of corrupt goo. The state needs to be mended back to health and the tax base shored up, with a renewed focus on financial transactions. DM168
This story first appeared in our weekly DM168 newspaper, which is available countrywide for R25.