Off late an old wine in a new bottle concept is coming back up in the name Universal Basic Income. While this concept isn't new, it appears it gets revived at least once a century as the central bankers open their printing machines to help existing political regimes save their political capital by taking the escapist view and shrugging off their responsibilities by letting inflation carry out their dirty work instead of letting a recession take out the toxic inefficiencies of the system.
Why should central bankers care being politically unpopular? That said, central banks are bit a double edged sword like the judiciary if allowed to go rogue. Individuals misuse institutions to further their agendas as seen around in the judicial ecosystems around the world.
From deliberately unpopular decision at the worst of times for the political dispensations that lead to as much as regime changes.
Back to topic.
Sadly even some economists are seen to support the idea. Politicians support the idea to win over electorate by giving Government's cash instead of from own pocket and the naive' idealists led by conniving beneficiaries i.e: activists flush with institutional funding as a result of excess cash printing having nothing to lose support the idea which is further amplified the media ecosystem benefiting the whole food-chain of the UBI idea.
As noticed, such ideas are generally more popular in countries that benefit from geopolitical groupings and have access to low cost bonds funded by disgruntled elements from autocratic regimes desperate for legitimacy or creating a safety net for self and family post their escape.
Additionally, even the top leaders in these regimes themselves it appears face pressures from self appointed global protectors to invest in 'civilized societies' as a means of securing their regimes as also their need for access to reserve currency to conduct cross border transactions themselves.
Point being, these inefficient ideas can be sustained by sucking out inefficiencies of the peripheral / external funding being available whether the political benefactors being aware of that or not being another matter.
These mostly incidental beneficiaries of the dividends of centuries long geopolitical events fail to realize that this phase of surplus funds of a strong globally dominant currency that they are benefitting from is just a small phase of the long civilizational churn in which even such inefficient ideas may appear like a spark of brilliance to a limited audience.
The global economic structure that came about post WW2 and Brettonwoods allowed for these ideas to be funded by the surplus funds created by being at the epicentre of the global economic and financial centres backed by strong military and military alliances further backed by strong bond markets aand having hosted the overground and underground financial instruments trading exchanges furthered by the global shipping insurance control.
This set of luxuries is fast receding.
In the first instance the very idea of distributing free money is inflationary. There is spectrum of variation in inflation. While mostly avoided by plague by central banks, the reason for spike in inflation may range from moderately positive to toxic at the other end of the scale.
This hurts developing countries with less financially stable economies, weaker currencies, comparatively far less say in the global economic events, high cost international borrowing costs (unless provided by few institutions) & multiple other priorities, infrastructure creation needs, higher opportunity costs vs. developed countries / advance economies.
Even autocracies may reconsider undoing these.
In my opinion, inflation caused by irresponsible money distribution without human and capital productivity expectation ideally baked in the program eventually create toxic inflation. It may also be considered the most toxic as in a democracy removing these programs will most certainly have negative electoral consequences. The opposition would even go the extent of making promises of increasing these amounts manifold as they have nothing to lose with single minded focus of anyhow getting to the seat of power.
At the same time this sucks out productive investing corpus out of both national and local government balance sheets, demoralize qualified meritorious talent that may increasingly look to leave the country for foreign shores. Many of them would have done so any how. But with such fiscally irresponsible actions the government in developing countries may provide an additional strong reason tilting the balance in favour of the decision to leave. This brain drain further adds to the costs of these inefficient decisions.
After the slight digression back to developed economies.
The few pilot programs that we have seen been tested over the last few years in few areas of U.S, Canada, U.K, Scandanavia has had mixed results. The onset of covid did create a short-term strong justification for mass layout which was certainly done in U.S, Australia among others.
The fiscal outcome? Not just because of Basic Income projects but the fiscal deficit of U.S is now at highest ever in history. As the BRICS courrency gets launched and eventually gains acceptance if only in cross border central bank settlements will the experiment of Basic Income even appear worthy of discussion let alone being viable.
(Incomplete. To be updated.)
