UNIVERSAL BASIC INCOME: TOWARDS A JUST AND FAIR SOCIETY
Updated: Feb 2
“We strive for the best we can attain within the scope the world allows.”
― John Rawls, Political Liberalism: Expanded Edition
Giving Rs 6000 per year without any conditionality to families below the poverty line is an attractive policy intervention for social justice. The government of India implemented this scheme in 2019. The target group for the intervention was "all poor households with landholdings of less than 2 hectares". Later, the government dropped the constraint of landholding size from the scheme effectively making the transfer of money condition less. Such conditional cash transfer policy has some shortcomings from the perspective of philosophy and economics. The caveat to such intervention can come from an efficiency and moral point of view.
The concept of justice as per Rawls is treating like cases alike; no arbitrary distinction should be made. Rawls defines the basic structure of society as the primary subject of justice. The institutions that define the various social positions which determine one's expectations in life are the basic structures of society. Institutions are a public system of rules which define offices and positions with their rights, duties, powers and immunities, and the like. In the Original Position, the principles which will determine the basic structure of society are to be chosen. These principles are chosen from behind the Veil of Ignorance, where there is no information about the circumstances under which one would be born. Rawls argues that the principles agreed upon in the Original Position are guaranteed to be just. He gives two principles of Justice (Rawls, 2017)
1. Each person is to be granted an equal right to the most extensive basic liberty compatible with a similar liberty for everyone else.
2. Social and economic inequalities are to be arranged so that they are
Attached to positions and offices open to all, under conditions of fair equality of opportunity.
To the greatest expected benefit of the least advantaged. (Difference Principle)
By transferring Rs 6000/year to families living below the poverty line, inequalities are not going to vanish. The people who live below poverty can be seen as living below a threshold. They do not have resources to generate wealth and a lack of wealth reinforces their position in society. Such inequalities do not improve their situation. In Rawls’ framework of justice, the basic structure of society allows inequalities to exist if these inequalities improve everyone’s situation, including that of the least advantaged. But there is one condition attached to it. The first principle of justice is lexically before the second principle of justice. This implies that the basic structure will allow inequalities to exist if they improve everyone's situation, provided they are consistent with equal liberty and fair opportunity. Rawls considers his two principles as maximin solution to the problem of social justice i.e., maximize the position of the worst off. Transferring Rs 6000/year to families living below the poverty line will improve their position and is consistent with the first principle of justice. The assumption here is that those living below the poverty line are the worst off. But the problem is that the poverty line is an artificial construct. If someone is just above the poverty line, that person can be just as worse off as someone just below the poverty line.
Criteria for judging social and economic arrangements in the Original Position is Pareto Optimality. Pareto optimality is the situation in which it is impossible to make someone better off without making someone worse off. The allocation of resources at Pareto optimal is Pareto Efficient. In other words, Rawls does not want the baseline to move downwards for anyone while adjusting social and economic inequalities. Does transferring Rs 6000 to families living below the poverty line without any condition shift the baseline down for someone? Now imagine if families below the poverty line receive Rs 6000 per year. What happens to the poverty line now? It is reasonable to assume that the income of families below the poverty line has increased by Rs 6000. Since the income is not tied, the consumption of these families would increase. This would raise the overall demand, thus increasing prices. The families who were just above the poverty line become worse off. The baseline has been shifted downwards for them. One of the conditions can be that the State can keep the increase in price in check. However, in doing so the State would be intervening in the "invisible hand" of the market which is not preferred. The other option could be that the State could reduce indirect taxes to cushion the effect of inflation. This will reduce the treasury of the State itself and harm its long-term ability to keep on paying Rs 6000 to the families below the poverty line.
The poverty line alone cannot help in the identification of the worst off in society. One can do away with the poverty line and instead argue that a basic income can be transferred to everyone. Here, Universal Basic Income (UBI) enters the framework. Rawls argues that parties in the original position view themselves as free persons who can alter and revise their ends. For pursuing their ends, parties recognize that certain basic liberties are necessary. UBI, by dissociating income from work, provides an opportunity for leaving poorly paid jobs, riskier jobs, thereby, freeing people to alter and revise their ends. At the same time, it does not shift the baseline downwards for anyone.
The reallocation of resources, in this case transferring Rs 6000/year to families below the poverty line, also comes from individuals who are entitled to their possessions because of their effort towards the creation of wealth and exchange of goods and services. In a sense, cooperation among more endowed and less endowed people is necessary for the welfare of all. Rawls and Nozick look at cooperation from opposite ends. According to Rawls, principles of justice provide the basis on which more endowed people can expect the willing cooperation of others for the welfare of all. Nozick looks at it from the viewpoint of less endowed people. Nozick questions whether the principles of justice provide the basis on which less endowed people could expect the willing cooperation of others. According to him, it is reasonable to assume that in the scheme of general cooperation, it is the less endowed who stand to gain more than the more endowed people. This provides ground for complaints from the more endowed sections of society.
While transferring Rs 6000/year to families below the poverty line creates Pareto sub-optimal output, UBI is much more efficient. While it creates reasons for complaints from a more endowed section of society, other interventions could be designed to mitigate some of the complaints. It would be preferable to transfer basic income to everyone without any conditions.
Rawls, J. (2017). Theory of justice. In Theory of Justice. https://doi.org/10.4324/9781912303441
About the author: Mohit Krishna is a second-year student of Masters in Public Policy at O.P Jindal Global University. He is presently pursuing capstone at National Council for Applied Economic Research. The views are personal.
Cover Image: DNA