Rajiv Sethi, Professor of Economics at Barnard College, Columbia University, and External Professor, the Santa Fe Institute, argues for a universal basic income and raises substantive issues on the implications for the financial sector. Two insights are important in this article:
- The idea that a universal basic income need not be a fixed nominal amount:
A variant of this idea, proposed by economist Debraj Ray, is that of a universal basic share. Instead of the payment being fixed in nominal terms, it would be specified as a share of national income. This means that policies that are beneficial in the aggregate but costly to some can still garner political support, since the increased prosperity is more broadly shared. Furthermore, a universal basic share would not need to be updated periodically or indexed to inflation.
- Gaining political support will require ensuring financial stability. He writes,
If the idea of a universal basic income is to garner enough popular support to make it politically feasible, it will have to be designed with great care. One approach to design and implementation is to link it to the broader goals of financial stability and counter-cyclical policy. How might this be done?
Among the many important functions of the financial sector, perhaps the most crucial is the maintenance of a stable payments system. A breakdown in this system is so costly that most countries have institutional safeguards in place to prevent it. One of these is insurance for deposits held at commercial banks. In the United States, for instance, the Federal Deposit Insurance Corporation (FDIC), backed by the full faith and credit of the government, guarantees the safety of deposits as high as a quarter-million dollars. Since its founding in 1933, no insured depositor has suffered a loss, despite thousands of bank failures over this period.
And this conclusion, is thought provoking in the sense of universal income being linked to universal bank accounts:
These proposals—a universal basic income, accounts at the central bank for all citizens, elimination of deposit insurance and monetary policy through direct transfers—are radical departures from the status quo. But desperate times call for bold measures, and an integrated approach to our challenges may prove to be successful where prior piecemeal efforts at reform have failed.