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Security and Laissez-faire

A response to "A Basic Income for All"by Philippe van Parijs.

Emma Rothschild

The idea of a universal subsistence income is consonant, in several respects, with the traditions of free-market political economy. One of the most powerful early pamphlets in favor of the unlimited freedom of commerce in subsistence foods–Condorcet’s Réflexions sur le commerce des blés of 1776– begins with an unconditional assertion: "That all members of society should have an assured subsistence each season, each year, and wherever they live … is the general interest of every nation."1 It is "highly desirable, that the certainty of subsistence should be held out by law to the destitute able-bodied," John Stuart Mill wrote in 1848, in his account of the foundations and limits of laissez-faire.2 In The Road to Serfdom, in 1944, F. A. Hayek suggested that "the security of a minimum income," or the "certainty of a given minimum of subsistence for all," should be "provided for all outside of and supplementary to the market system."3

The concern with universal security of subsistence corresponded to several continuing preoccupations. One was with the relationship between markets and social institutions. Freedom in economic life–the freedom to transact, exchange, work, carry one’s goods to market–was thought by Condorcet and Mill to be an end in itself, as well as a means to the end of economic opulence. It was also thought to be founded on certain political and legal circumstances. The most important had to do with the law; the "equal and impartial administration of justice which renders the rights of the meanest British subject respectable to the greatest," as Adam Smith wrote in the Wealth of Nations.4 Another circumstance had to do with ways of thinking– that all members of society should be fairly enlightened, in the sense of having had at least some education, of not being intimidated by political oppression, and of being disposed, at least occasionally, to question established privileges and prejudices. These circumstances were extremely unlikely to obtain, it was believed, in a society of such inequality that some individuals were insecure even with respect to their basic subsistence.

A second preoccupation was with the causes of individual enterprise. Individual security–in the sense that no one lived so close to the margin of subsistence as to fear a sudden descent into destitution–was thought to be the best foundation for industriousness. To take risks, to move jobs, to think of new ways of making money–these were the dispositions of an enterprising society, and they were unlikely to flourish if individuals were exposed to very large and very sudden losses, such that even their subsistence was at risk. The incentives to enterprise have often been identified in terms of what Malthus described as the "hope to rise" and the "fear to fall," the reward of industry and the punishment of indolence. It is interesting that Adam Smith was concerned virtually exclusively with hopes and rewards, or with positive incentives. The thought of precariousness and insecurity was a source of "anxious and desponding moments." Fear was "a wretched instrument of government." When individuals were profoundly discouraged, for Mill, "assistance is a tonic, not a sedative."

A third preoccupation was with the simplicity of policy. Smith and Condorcet were harshly critical of the regulations of the commercial system. These regulations were inefficient, and they were also unjust. They provided almost limitless scope for "vexatious" investigations of individual citizens, for "visitations" of their homes, for "the inspections, the prohibitions, the condemnations, the vexations" that were for Condorcet characteristic of city life. The provisions of the English Poor Laws, in Smith’s description, were such as to obstruct the freedom of movement of the poor. The poor were subject to "the caprice of any churchwarden or overseer," and to being removed in an "evident violation of natural liberty and justice." Government should be reduced, in Condorcet’s opinion, to the "smallest possible quantity." But it should also be made much more simple. There should be relief for misery when it could not be prevented. There should be an end to the "humiliation attached to poverty."

All of these eighteenth- and nineteenth-century arguments provide good reasons to take very seriously Van Parijs’s proposal for a universal basic income. The UBI would be likely to improve the social conditions for economic competition. It would be likely to make at least some individuals more enterprising, in that it would reduce the fear of extreme deprivation, or of uncertainty with respect to subsistence income. It would be easy to understand, and inexpensive in administrative costs. It would be equitable, in that it would provide relatively little opportunity for the vexatious and oppressive use of complicated regulations. It would hold out the promise of universal security, in the sense that every individual could be sure that her situation, while it may become worse, will never fall below a level of minimum subsistence.

The eighteenth century economists’ own policies for increasing security were substantially different from the UBI. Condorcet, in the 1790s, proposed a combination of social insurance, education, emergency relief, and a universal system of savings banks, whereby even the smallest, daily savings could be deposited securely (a sort of micro-credit, with the poor as the creditors). Social policies of this sort are complementary to a UBI, and would continue to be important even if a UBI were implemented. The objective of increasing universal security of subsistence does not require a UBI. A UBI might indeed increase inequality, if it were financed by a reduction in social expenditures, or in transfer payments to the elderly and the infirm, or in emergency relief.

Any society, or at least any society in which a subsistence income is substantially less than the average income, can in principle afford a UBI. In the United States, government transfer payments now cost about $1 trillion per year, or the equivalent of more than $5,000 for every adult resident. But the effects of a UBI would be highly sensitive to the level of income provided. A UBI of $5,000 per year, for example, would be likely to have very little effect on the insidious "unemployment trap" that Van Parijs describes. The definition of a subsistence income is elusive (as the extended eighteenth-century disputes over necessities and luxuries suggested), and a UBI that had a substantial effect on the subjective sense of security of the very young might have almost no effect on the lives of older people. Its principal effect might be to reduce inequality, including the inequality of insecurity, across different groups of young people: those who go to university and those who do not, those who are within the prison and penal system and those who are not, those who are employed and those who are unemployed, those who vote and those who do not.

The most important promise of a UBI–and an important cost, as well–seems to me to be political. The existence of extreme poverty and insecurity, like the existence of extreme opulence, was thought by some of the early theorists of laissez-faire to pose very serious problems for political life. The very rich could buy political power through regulations that favored their own enterprises, privileges (or private laws), changes in public opinion, changes in the rules of market games. This was an obstruction, it was thought, to the efficient operation of economic competition, and to democratic political institutions. The very poor, in the ancien régime, were excluded from political power on the grounds (among others) that they were dependent on other people, they had no time to become educated, and they had no interest in the great questions of public life or in the future of the society. The equality of rights, Condorcet wrote during the French Revolution, would be no more than a "ghostly imposture" if large numbers of people continued to subsist on insufficient and uncertain resources and were subject to "that inequality which brings a real dependence."

The democratic institutions of the most developed countries of the 21st century are not an imposture. But they are weakened, in important ways, by the power of money in electoral politics, and by the powerlessness, the voluntary or imposed exclusion, of the poor and the young. The percentage of persons voting in the 1996 US Presidential Election varied from 75 percent for white males aged 65 to 74, to 12 percent for Hispanic- origin males aged 18 to 24. This is not a flourishing political society. It is a society of inequality in the exercise of political rights. The inequality of income, and of security with respect to subsistence income, is only one among many explanations for this incapacity. But the security of (present and future) subsistence to which a UBI could contribute–a security that would include even the indolent and the undeserving and the imprisoned–holds some promise, at least, of political renewal.

The costs of the UBI are also political, in a different and wider sense. Van Parijs starts by saying that "everyone should be paid a universal subsistence income." I take this "everyone" to be truly universal, to include everyone, everywhere in the international or global society. But this is a distant objective. I think it is fairly reasonable to expect that a society of greater and more universal justice would also be a society that was more open to individuals and influences from other societies. Individuals who have a strong sense of living in a society of equals are perhaps more likely to have a sense that they live in the same (international) society as other, distant people. But in the short term, at least, the effort to ensure universal security in one or more rich societies might pose quite serious difficulties for freedom of movement between countries, and for the freedom (including freedom from "vexatious" prohibitions) of registered and unregistered residents.5 A UBI might make the inequality between individuals in different societies more obvious, and more oppressive.

One political challenge, now, is to make democratic institutions more engaging and more inclusive. The other challenge is to make them more international–to invent political institutions in which individuals in different countries participate on the basis of equal rights. My concern about the UBI scheme is that it would be helpful in terms of one challenge, and unhelpful in terms of the other. It is difficult to imagine a global political procedure, open and equal, in which it was determined that there should be very different levels of UBIfor individuals in different societies. I hope that ideas of universal security of subsistence can "inspire and guide more modest immediate reforms," as Van Parijs writes. I also hope that they can contribute, eventually, to a politics of global inclusion.

Emma Rothschild directs the Centre for History and Economics at King’s College in Cambridge, England. Her new book, Economic Sentiments, will be published next year.

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1 Réflexions sur le commerce des blés [1776], in Oeuvres de Condorcet, ed. A. Condorcet, O’Connor, and M. F. Arago (Paris: Firmin Didot, 1847-1849), p. 111.

2 John Stuart Mill, Principles of Political Economy with Some of Their Applications to Social Philosophy [1848], in Mill, Collected Works vol. 3 (Toronto: University of Toronto Press, 1965), p. 962.

3 F. A. Hayek, The Road to Serfdom [1944] (London: Routledge and Kegan Paul, 1971), pp. 89-90.

4 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. R. H. Campbell and A. S. Skinner (Oxford: Clarendon Press, 1976), p. 610.

5 Hayek was concerned about these difficulties in his account of minimum income policies in 1944. See The Road to Serfdom, p. 90.

Originally published in the October/ November 2000 issue of Boston Review

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