Long read: Why we should give free money to everyone

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We tend to think that simply giving people money makes them lazy. Yet a wealth of scientific research shows the contrary: free money helps lift people out of poverty. The time has come for a radical reform of the welfare state, writes Dutch author Rutger Bregman.

London, May 2009—An experiment is underway. Its subjects: 13 homeless men. They are veterans of the street. Some have been sleeping on the cold pavement of the Square Mile, Europe’s financial centre, for going on 40 years. Between the police expenses, court costs and social services, these 13 troublemakers have racked up a bill estimated at £400,000 or more. Per year.

The strain on city services and local charities is too great for things to go on this way. So Broadway, a London-based aid organisation, makes a radical decision. From now on, the City’s 13 consummate drifters will be getting VIP treatment. It’s adiós to the daily helpings of food stamps, soup kitchens and shelters. They’re getting a drastic and instantaneous bailout.

From now on, these rough sleepers will receive free money.

To be exact, they’re getting £3,000 in spending money, and they don’t have to do a thing in return. How they spend it is up to them. They can opt to make use of an adviser if they’d like—or not. There are no strings attached, no questions to trip them up.

The only thing they’re asked is: What do you think you need?

Gardening glasses

‘I didn’t have enormous expectations,’ one of the experiment’s social workers later recalled. But the drifters’ desires proved eminently modest. A telephone, a dictionary, a hearing aid—each had his own ideas about what he needed. In fact, most were downright thrifty. After one year, each had spent an average of just £800.

Take Simon, who had been strung out on heroin for 20 years. The money turned his life around. Simon got clean and started taking gardening classes. ‘For some reason, for the first time in my life, everything just clicked,’ he said later. ‘I’m starting to look after myself, wash and shave. Now I’m thinking of going back home. I’ve got two kids.’

A year and a half after the experiment began, seven of the 13 rough sleepers had a roof over their heads. Two more were about to move into their own apartments. All 13 had taken critical steps toward solvency and personal growth. They were enrolled in classes, learning to cook, going through rehab, visiting their families and making plans for the future.

‘It empowers people,’ one of the social workers involved in the project said about the personalised budget. ‘It gives choices. I think it can make a difference.’

After decades of fruitless pushing, pulling, pampering, penalising, prosecuting and protecting, nine notorious vagrants had finally been brought in from the streets. The cost? Some £50,000 a year, including the social workers’ wages. In other words, not only did the project help nine people, it also cut costs considerably. Even the Economist had to conclude that the ‘most efficient way to spend money on the homeless might be to give it to them’.

Hard data

Poor people can’t handle money. This seems to be the prevailing sentiment, almost a truism. After all, if they knew how to manage money, how could they be poor in the first place? We assume they must spend it on fast food and soda instead of on fresh fruit and books. So to ‘help’, we’ve rigged up a myriad of ingenious assistance programmes, with reams of paperwork, registration systems and an army of inspectors, all revolving around the biblical principle that ‘those unwilling to work will not get to eat’ (2 Thessalonians 3:10). Touted as a shift ‘from welfare to workfare’, the underlying message is clear: free money makes people lazy.

Except that according to the evidence, it doesn’t.

Already, research has correlated unconditional cash disbursements with reductions in crime, child mortality, malnutritionteenage pregnancy and truancy, and with improved school performance, economic growth and gender equality. ‘The big reason poor people are poor is because they don’t have enough money,’ noted economist Charles Kenny in Bloomberg Businessweek, ‘and it shouldn’t come as a huge surprise that giving them money is a great way to reduce that problem.’

In their book Just Give Money to the Poor (2010), scholars at the University of Manchester furnish countless examples of cases where cash handouts with few or no strings attached have worked. In Namibia, figures for malnutrition took a nosedive (from 42% to 10%), as did those for truancy (from 40% to virtually 0%) and crime (by 42%).

In Malawi, school attendance among girls and women surged 40%, regardless of whether the cash came with or without conditions. Time and again, the ones to profit most are children. They suffer less hunger and disease, grow taller, perform better at school and are less likely to be forced into child labour.

From Brazil to India, from Mexico to South Africa, cash transfer programmes have become all the rage across the Global South. By 2010, they were already reaching more than 110 million families in 45 countries.

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. And, as it happens, there is one category of product on which poor people do not spend their free money, and that’s alcohol and tobacco. In fact, a major study by the World Bank demonstrated that in 95% of all researched cases in Africa, Latin America and Asia, alcohol and tobacco consumption either remained the same or declined.

But it gets even stranger. In Liberia, an experiment was conducted to see what would happen if you gave $200 to the shiftiest of the poor. Alcoholics, addicts and petty criminals were rounded up from the slums. Three years later, what had they spent the money on? Food, clothing, medicine and small businesses. ‘If these men didn’t throw away free money,’ one of the researchers wondered, ‘who would?’

Utopia

Free money. It’s a notion already proposed by some of history’s leading thinkers. Thomas More dreamed about it in his book Utopia in 1516. Countless economists and philosophers—Nobel Prize winners among them—would follow. Its proponents have spanned the spectrum from left to right, all the way to the founders of neoliberal thought, Friedrich Hayek and Milton Friedman. And Article 25 of the Universal Declaration of Human Rights (1948) promises that, one day, it will come.

A universal basic guaranteed income.

And not merely for a few years, or in developing countries alone, or only for the poor, but just what it says on the box: free money for everyone. Not as a favour, but as a right. Call it the ‘capitalist road to communism’. A monthly allowance, enough to live on, without having to lift a finger. The only condition, as such, is that you ‘have a pulse’. No inspectors looking over your shoulder to see if you’ve spent it wisely; nobody questioning if it’s really deserved. No more special benefit and assistance programmes; at most an additional allowance for seniors, the unemployed and those unable to work.

Basic income: it’s an idea whose time has come.

Mincome, Canada

In a warehouse attic in Winnipeg, Canada, nearly 2,000 boxes lie gathering dust. The boxes are filled with data—graphs, tables, reports, interviews—about one of the most fascinating social experiments in post-war history.

Evelyn Forget, a professor at the University of Manitoba, first heard about the records in 2004. For five long years she tried to convince Canada’s national archives to allow her access to the warehouse. Finally, in 2009, she succeeded. Stepping into the attic for the first time, Forget could hardly believe her eyes. It was a treasure trove of information on the real-world implementation of Thomas More’s dream from five centuries earlier.

In March 1973, the provincial government of Manitoba earmarked a sum of $83 million in modern U.S. dollars for the project. They chose Dauphin, a small town of 13,000 northwest of Winnipeg, as the location of the experiment. Everybody in Dauphin was guaranteed a basic income, ensuring that no one fell below the poverty line. In practise, this meant 30% of the town’s inhabitants—1,000 families in all—got a check in the mail each month. A family of four received what would now be around $19,000 a year, no questions asked.

For four years, all went well, but then elections threw a spanner in the works. A conservative government was voted into power. The new Canadian cabinet saw little point to the expensive experiment, for which the national government was footing three-quarters of the bill. When it became clear the new administration wouldn’t even fund an analysis of the experiment’s results, the researchers decided to pack their files away in some 2,000 boxes.

When Professor Forget first heard about Mincome, no one knew what, if anything, the experiment had actually demonstrated. For three years, she rigorously subjected the data to all manner of statistical analysis. No matter what she tried, the results were the same every time.

Mincome had been a resounding success.

From experiment to law

‘Politically, there was a concern that if you began a guaranteed annual income, people would stop working and start having large families,’ said Forget.

What really happened was precisely the opposite. Young adults postponed getting married, and birthrates dropped. Their school performance improved substantially. The ‘Mincome cohort’ studied harder and faster. In the end, total work hours only notched down 1% for men, 3% for married women and 5% for unmarried women. Men who were family breadwinners hardly worked less at all, while new mothers used the cash assistance to take several months’ maternity leave, and students to stay at school longer.

Forget’s most remarkable finding, though, was that hospitalisations decreased by as much as 8.5%. Considering the size of public spending on health care in the developed world, the financial implications were huge. Several years into the experiment, domestic violence was also down, as were mental health complaints. Mincome had made the whole town healthier. Forget could even trace the impacts of receiving a basic income through to the next generation, both in earnings and in health.

Dauphin—the town with no poverty—was one of five guaranteed income experiments in North America. The other four were all conducted in the United States. Few people today are aware that the United States was just a hair’s breadth from realising a social safety net at least as extensive as those in most western European countries. When President Lyndon B. Johnson declared his ‘War on Poverty’ in 1964, Democrats and Republicans alike rallied behind fundamental welfare reforms.

First, however, some trial runs were needed. Tens of millions of dollars were budgeted to provide a basic income for more than 8,500 Americans in New Jersey, Pennsylvania, Iowa, North Carolina, Indiana, Seattle and Denver in what were also the first-ever large-scale social experiments to distinguish experimental and control groups. The researchers wanted answers to three questions: (1) Would people work significantly less if they received a guaranteed income? (2) Would the programme be too expensive? (3) Would it prove politically unfeasible?

The answers were no, no and yes.

Declines in working hours were limited across the board. ‘[The] declines in hours of paid work were undoubtedly compensated in part by other useful activities, such as search for better jobs or work in the home,’ noted the Seattle experiment’s concluding report. For example, one mother who had dropped out of high school worked less in order to earn a degree in psychology and get a job as a researcher. Another woman took acting classes; her husband began composing music. ‘We’re now self-sufficient, income-earning artists,’ she told the researchers. Among the young included in the experiment, almost all the hours not spent on paid work went into more education. Among the New Jersey subjects, the rate of high school graduations rose 30%.

And thus, in August 1968, President Nixon presented a bill providing for a modest basic income, calling it ‘the most significant piece of social legislation in our nation’s history’. A White House poll found 90% of all newspapers enthusiastically receptive to the plan. The National Council of Churches was in favour, and so were the labour unions and even the corporate sector (see Brian Steensland’s book The Failed Welfare Resolution, page 69). At the White House, a telegram arrived declaring: ‘Two upper middle class Republicans who will pay for the programme say bravo.’ Pundits were even going around quoting Victor Hugo—’Nothing is stronger than an idea whose time has come.’

It seemed that the time for a basic income had well and truly arrived.

‘Welfare Plan Passes House […] a Battle Won in Crusade for Reform,’ was the headline of the New York Times on April 16, 1970. With 243 votes for and 155 against, President Nixon’s Family Assistance Plan (FAP) was approved by an overwhelming majority. Most pundits expected the plan to pass the Senate, too, with a membership even more progressive than that of the House of Representatives. But in the Senate Finance Committee, doubts were raised. ‘This bill represents the most extensive, expensive and expansive welfare legislation ever handled,’ one Republican senator said. Most vehemently opposed, however, were the Democrats. They felt the FAP didn’t go far enough and pushed for an even higher basic income. After months of being batted back and forth between the Senate and the White House, the bill was finally canned.

In the following year, Nixon presented a slightly tweaked proposal to Congress. Once again, the bill was accepted by the House, now as part of a larger package of reforms. In his 1971 State of the Union address, Nixon considered his plan to ‘place a floor under the income of every family with children in America’ the most important item of legislation on his agenda (see Steensland, page 157).

But once again, the bill foundered in the Senate.

Not until 1978 was the plan for a basic income shelved once and for all, however, following a fatal discovery upon publication of the final results of the Seattle experiment. One finding in particular grabbed everybody’s attention. The number of divorces had jumped more than 50%. Interest in this statistic quickly overshadowed all the other outcomes, such as better school performance and improvements in health. A basic income, evidently, gave women too much independence.

Ten years later, a re-analysis of the data revealed that a statistical error had been made. In reality, there had been no change in the divorce rate at all.

‘It Can Be Done! Conquering Poverty in America by 1976,’ Nobel Prize winner James Tobin confidently wrote in 1967. At that time, almost 80% of Americans supported a guaranteed basic income. Years later, Ronald Reagan would famously sneer: ‘In the ’60s we waged a war on poverty, and poverty won.’

Yet some ideas just won’t die.

Recent years have seen basic income make a comeback on political agendas. Switzerland is already looking forward to a referendum. Large-scale experiments have been announced in Finland and Canada, and plans are in the works in nearly 20 cities in the Netherlands. Even in Silicon Valley, basic income is the talk of the town.

Maybe now the time has come that we can finally be rid of that pointless distinction between two types of poor—and to the major misconception that we almost managed to dispel some 40 years ago: the fallacy that a life without poverty is a privilege you have to work for, rather than a right we all deserve.

Remember: the great milestones of civilization always have the whiff of utopia about them at first. But almost as soon as a utopia becomes a reality, it often comes to be seen as utterly commonplace. Utopias always start out small, with experiments that ever so slowly change the world.

It happened just a few years ago on the streets of London, when 13 street sleepers got £3,000, no questions asked. As one of the aid workers said, ‘It’s quite hard to just change overnight the way you’ve always approached this problem. These pilots give us the opportunity to talk differently, think differently, describe the problem differently…’

And that’s how all progress begins.

Rutger Bregman (1988) is the author of Utopia for Realists: The Case for a Universal Basic Income, Open Borders, and a 15-Hour Workweek, available in English and published by The Correspondent. Like him on Facebook and follow him on Twitter @rcbregman.

Translated from Dutch by Elizabeth Manton.