First of all, I am a big believer in charity. Charities, if properly run, do a great deal of good and the world is better off with them than without them. I am not talking about giving to charity. I am talking about the concept of Universal Basic Income (UBI)

Universal Basic Income

The basic concept here is, every person above a certain age receives a monthly stipend, which should, in theory, be enough to cover the basic necessitates of life. This is, as the name implies, universal. Everyone is entitled to this benefit no matter your income level or net worth. There are arguments about how much should each person get, or where is the money coming from but I think the real question is:

Should we give them money at all?

A great book by Annie Lowrey entitled "Give People Money" makes a great case for the positive benefits of UBI on select poor communities that have participated in UBI trials around the world. She argues that the people who received a monthly amount, without strings attached generally improved their lives. It allowed single mothers to go back to school, start businesses or afford child care so they can work full time. It allowed people to pay their bills and keep the lights on so they had time to work on making a living elsewhere or take care of dependents. There were a few that fell into a slovenly stupor and used the money for drugs, alcohol or gambling, but these were a minority. 

I can see that this is a semi-effective way to alleviate poverty in the short term and helps to stimulate the local economy as people tend to spend more. But I believe it is short sighted.

Jordan Peterson, the controversial Canadian intellectual, has stated that he thinks UBI is a bad idea precisely for the reasons above. It enables people who make bad decisions with money to make even bigger bad decisions. It sends the drug addict deeper into his or her addiction. It allows the alcoholic to go an an extended bender or the gambler to bet it all away. He believes it is just fuelling the fire of bad behaviour. I cannot disagree, but I think it is even bigger than that. 

The fact is, most people are terrible with money. If this were not the case, most people would not be living paycheck to paycheck. Most people would be able to work when they want and travel when and where they want and live whatever lifestyle they please, but you and I know, this is not the case. Most people struggle with finances. Most people are idiots with money. 

So by giving money to people, most people would not use it properly. They would squander it in a myriad of ways, and continue to be poor.  Let me explain what I mean..

Jim Rohn said:

"If someone gives you a million dollars, you better hurry up and become a millionaire"

He is saying that if you are bad with money, more money won't fix the problem. I have written about this before and it is a sad truth. Money will not solve your problems. 

Inflation

Giving people money would add to inflation in two ways. 

1. Everyone would just raise the cost of things so that the minimum monthly payment would still not be able to take care of you. It is inevitable that greed will triumph over compassion. It is just the way it is with capitalism. It is driven by growth and if left unchecked, it will implode upon itself. There needs to be some boundaries set.

2. Those that already have a leg up will continue to do so, with even more money in play. The GAP between the rich and the poor will continue to grow. I see this as a double-edged sword:

   1. The rich will get richer and the poor will still be at the mercy of the rich. Our system is not just numbers based, it is a mindset too. If you have servants, you understand what I mean.

   2. Those that are motivated will envy the lifestyles of the rich and work hard to become them. This is a plus. As Hannibal Lector said,

      "You can only covet that which you can see"

The Solution

I feel there are two things that would be a better use of resources than UBI:

1. Financial Education- I believe that kids should be taught basic money management skills in school. It should be a required course. And it should not just include budgeting, coupon clipping and what mutual funds are. It should be an in-depth analysis of macro-economics, the psychology of money and how money actually works. It should cover investing, compounding, leverage, assets and multiple streams of income. The current education system assumes you will be a worker and consumer so the less you know, the better. This needs to happen.

2. Subsidised or free housing- In the city of Doha, one of the benefits given to the people who are natives to the country is free housing. Instead of giving people money, give them life. Even better, give them free food, water and clothing too. If the basic necessities of life are free, then work becomes a choice. You will not be working to survive, you will be working to actually achieve something. We as a species have figured out how to do so many amazing things, I am sure we can figure out how to do this.

By having the basics of existence taken care of and knowing how to manage money, you are set up to succeed. There is no reason to be struggling financially. You can choose to be poor if you wish, but your station in life becomes exactly that - a choice. You are free to grow your wealth to any degree you care to. You are free to work as long and hard as you see fit. It is a choice. This is what I would call freedom. You are no longer a slave to the capitalist system, you are free to participate or not. If you are ambitious, go crazy. Make a billion dollars and have yacht parties. If you are not so ambitious, you can at least survive. This would be a better use of resources.

So, as much as Universal Basic Income has good intentions, it is a solution based on an outdated paradigm. There needs to be ways to intertwine capitalism and collectivism so that everyone wins.

My latest book delves deeply into this topic and offers some ideas that we can use to create an economic system that allows for the collective wellbeing of humanity and the opportunity to create as much wealth as the ambitious among us want to achieve. 

Check it out HERE