Global Basic Income: Ending World Poverty Now
Where Universal Basic Income Meets Effective Altruism
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We can end extreme world poverty. And it’s easier than you think. In the past few years, the idea of a universal basic income (UBI) has entered the mainstream. Universal basic income is a program where all adult citizens of a country receive regular unconditional cash payments with no strings attached. Now imagine a universal basic income for the entire world, or at least a large portion of it. A global basic income (GBI). How should it look? What should its parameters be? How much should it pay, and how much would it cost? What are the logistics and obstacles? It seems pie in the sky, right? The details might surprise you. In certain respects, a global basic income may be easier to achieve than a national universal basic income.
GBI differs from UBI not only in scope and breadth, but in the way ordinary charity differs from effective altruism. Effective altruism is a social and philosophical movement that uses reason, evidence, and data to find the most effective ways to help others and maximize the positive impact of each donation or act. Effective altruists triage the world’s problems and focus their attention on causes that are clear-cut, quantifiable, and where each unit of resource can save or improve the most lives. It’s the science of philanthropy. Of course, universal or global basic income is not philanthropy — everyone gets it, not just the poor — but it can outperform just about any philanthropic endeavor, especially at the worldwide scale. Global basic income can abolish extreme poverty — and it can be done for pennies on the dollar.
Breaking Down Some Numbers
About ten percent of the world — 780 million people — live not only in poverty, but extreme poverty. The World Bank estimates that 9.3 percent of the planet lives on $1.90 a day or less (everything measured in USD). PEW Research estimates that the “Global poor”, those living on $2.00 a day or less, comprise 10.4 percent. The US poverty line is $12,880 per year. A universal basic income of $1,000 a month to lift all American adults to just about that line would cost $3.15 trillion per year, or 13.75 percent of US gross domestic product (GDP). The actual net cost would be substantially lower, factoring in cost savings, economic growth, and other downstream effects, but that is the up-front price tag.
By contrast, a global basic income to raise the “global poor” out of poverty, and put extra cash in everyone else’s hands too, could be done for $61 per adult per month, with a total cost of $4 trillion per year, or 4.29 percent of global GDP. The threshold for extreme world poverty is so much lower than poverty in developed countries that a global basic income at this level is vastly more economical, especially considering that the cost would be split between many nations.
To recap, lifting Americans out of poverty would cost $1,000 per month, or $12,000 per year, per adult. Lifting the world out of extreme poverty would cost $61 per month, or $732 per year, per adult. A global poverty-level GBI for the world’s 5.5 billion adults would cost only 27 percent more than a US poverty-level UBI for the United States’ 263 million adults, and the cost would be split between everyone.
Distributing Global Basic Income
The global basic income fund could save money on administrative costs by partnering with existing international financial institutions such as the World Bank, the International Monetary Fund, and others to distribute the GBI to recipients. For most people, here’s how it would work: adult citizens of participating countries would receive $61 per month (tax-free), either in USD or converted to the local currency (as they choose), electronically deposited into their bank accounts. There’s a slight hitch, though. Only 69 percent of the world’s adults have bank accounts. That’s 1.7 billion adults without one. About a tenth of these unbanked people live in high-income countries with ample access to physical banks and/or the internet and should be expected to open an account with relative ease in the run-up to any GBI implementation.
For everyone else, accounts may be created by the GBI fund or its affiliates. This would require internet access. 79 percent of people in developing countries have access to mobile phones, and 40 percent have access to both mobile phones and the internet. This would allow some portion of the unbanked to gain access if accounts were created for them. Large numbers of people in some developing countries also use mobile money accounts with their cell phones, SMS-based financial platforms that aren’t quite bank accounts but can function similarly. These technologies might also be utilized. As for the portion of people still left without, the governments of member countries with the aid of international institutions and charities would have to figure out strategies to get more people banked, and to provide alternate forms of payment to those who cannot be. There’s no clean-cut solution, but these numbers have improved substantially over the years, and will continue to.
As the cost of this GBI would be 4.29 percent of global GDP, if all countries participated, each could contribute a flat 4.29 percent of their respective GDPs to the global basic income fund. This revenue could be raised with taxes levied by the GBI fund, or it could be left to each country to come up with their portion however they see fit. In the latter case, administrative cost to the program would be further reduced, as each country would be self-servicing in this respect, and it would be one less sticking point for prospective member countries to disagree about. Restrictions or limitations on how much of the funds can be generated by printing currency should be included.
While everyone in participating countries will get their basic income, the wealthier nations will end up net payers, and the poorer ones will end up net benefactors. If fewer than all countries partake, each member’s contribution would be recalculated to reflect the total adults and collective GDP of the participating countries. The more top-heavy the lineup is — that is to say, the more wealthy nations are involved — the more overall funds will be available, and the more the cost will be distributed, and thus more palatable for each such country.
Integral to the feasibility of a global basic income is the participation of the world’s wealthiest nations. The following are the countries in the top 30 of both total and per capita GDP, according to the International Monetary Fund. (Bold indicates economies larger than a trillion dollars).
The United States, Japan, Germany, the United Kingdom, France, Italy, Canada, South Korea, Australia, the Netherlands, Switzerland, Sweden, Belgium, Ireland, Austria, Israel, and the top ten billionaires.
Ideally, you’d want all these players involved. Short of that, a majority of them, including a majority of the trillion-dollar club, would be needed to generate sufficient funds without imposing unduly burdensome costs on countries that cannot afford it. You may have noticed that “Top ten billionaires” is not a country (...yet). The ten richest people in the world, all worth more than $100 billion each, have a combined net worth of $1.5 trillion. While each of these individuals has a higher net worth than many smaller countries’ GDPs, taken together, they would rank 14th globally in absolute terms. If they donated 10 percent of their wealth to this cause, like an annual tithe, it would total nearly $152 billion. The billionaires are a special case, as their participation would be purely philanthropic, but they constitute such a large amount of wealth that they were included in this list.
While these 17 are crucial, one of them is indispensable.
Why the United States Is a Special Case
For any global UBI worthy of the name to work, the United States needs to be on board. The US is the keystone, given its disproportionately gargantuan economy. America has less than five percent of the world’s population, and yet its GDP accounts for nearly a quarter of the total world economy. A GBI without the United States would be like a city seeing most of its wealthiest residents moving away — and out of the tax base.
With a full global basic income spanning every country, the US would be footing a quarter of the cost — about a trillion dollars. In return, US citizens would cumulatively receive about $193 billion per year. You can see how this might be a hard sell. Yes, ending extreme global poverty would have all sorts of positive knock-on effects that would end up benefiting the US in the long-term, but politicians — and more to the point, the voting public — do not think long-term. I would love to be proven wrong, but in case I’m not, the GBI fund should seriously consider making some sort of special dispensation that would allow the US to pay a somewhat lower rate to get in on the GBI, if it’s the difference between them participating or not. It’s just too big an asset to leave off the table.
Bringing in Philanthropy
In addition to member countries paying into the fund, a GBI should also accept and indeed invite philanthropic donations, which should qualify as tax-deductible charitable giving. It would be foolish not to leverage every available revenue source. If just 0.1 percent of global GDP were donated to the fund, it would raise about $94 billion. If 0.5 percent were donated, it would entirely cover a very liberal estimate of the administrative costs for a global basic income.
Individuals in any participating country should also be allowed to opt out of their basic income and have it added to the global fund. Alternatively, the GBI could be set up as an opt-in program, where people could only receive it by signing up. With even tiny percentages of people opting out, billions of additional dollars can be saved. If 20 million people (0.3 percent of global adults) forewent their basic income, nearly $15 billion would be put back into the pot.
First World Benefits
A global basic income of $61 per month would eradicate extreme world poverty, but make no mistake, it would also have profound effects among developed nations. In the US, 13 million people in poverty are entirely disconnected from the social safety net. Nearly 80 percent live paycheck-to-paycheck, and 61 percent cannot afford an unexpected $1,000 expense. Anyone who’d tell you an extra $732 a year won’t make a difference to people is advertising their privilege. The COVID-19 stimulus checks have demonstrated that relatively modest sums of cash, by first world standards, can reduce poverty, and spur economic growth. The nonprofit policy analysis tool Policy Engine estimates that the equivalent of $61 per month would reduce poverty in the UK by 11 percent, and over 15 percent among seniors. Populations across the developed world would be more financially secure, healthier, mentally healthier, and have increased purchasing power.
The Problem of Cooperation
The primary obstacle to a global basic income isn’t the money — as we have seen, it’s actually comparatively inexpensive and an incredible value. The biggest hurdle is getting the whole world to cooperate. There is ample reason to be pessimistic about this. Given the nature of geopolitics, it is extraordinarily unlikely to get every single country on board with this project. Furthermore, it is not enough for countries to agree to participate; they must also be relied upon to allow the funds to be properly distributed to their people, and not to tamper with the process. Some countries are too corrupt to be trusted and may have to be excluded. The people of North Korea, for example, are surely suffering, but there may be functionally no way to get them the funds — and to ensure that they in fact get them. And while North Korea may be the starkest example, they aren’t the only one. Nevertheless, a GBI, even with less than all countries, would still be a historic feat of human progress.
At a relatively low cost, and even with only partial cooperation of the international community, large swaths of the world can be lifted out of extreme poverty. We can build a universal global floor, alleviating needless suffering, shrinking disparities, expanding opportunity, unleashing entrepreneurship, feeding children, and realizing untapped human potential. It’s an investment in humanity that we cannot afford not to make.
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I imagine you've already thought about this, but won't increasing inflation (because we're not increasing production) eat all the gains?
I come from Venezuela, so I know first hand how government handouts to alleviate poverty work great in the short run, and reek havoc in the long run.... How do we keep global inflation from gobbling up the 60$?
Cheers and thanks!
There's more problems than just cooperation.
Getting money to Americans who mostly have bank accounts and fixed addresses can be done using processes developed in the early 20th century (mailing checks, which can then be deposited into bank accounts).
The same is not true in most developing countries.
Only 57% of Romanians have a bank account and Romania is one of the more wealthy poor countries—poor to European standards, but not to world standards. Only 55% of Kenyans have bank accounts, the the number goes down from there all the way to Chad, where fewer than 9% of people have bank accounts.
This is one reason why Honduras—where only 43% of people have banking access—adopted Bitcoin as a currency. Cryptocurrency wallets function essentially the same as a bank account, where you can deposit and withdraw money stored away digitally. Now of course, the value of the money is highly volatile.
In most developing countries, however, the only way to get $61 to them is in cash. Most of the poorest people don't even have street addresses.