3/22/2018 Much ado about an impractical idea | The Indian Express

Home Opinion Columns Much ado about an impractical idea

Much ado about an

impractical idea
Attempts to legislate schemes akin to Universal Basic Income failed in 18th
and 19th century England. In China, too, they haven’t succeeded.

Written by Bibek Debroy | Published: March 22, 2018 12:05 am

Bhalla thinks UBI is a terrible idea because it messes up incentives. That may well be the case. I nd it
a terrible idea because I don’t know what UBI means.

Surjit Bhalla is a co-columnist in this paper and a colleague in the Economic

Advisory Council to the Prime Minister. Therefore, when he writes a new book,
reading it is an inevitable professional hazard. His new book is titled The New

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3/22/2018 Much ado about an impractical idea | The Indian Express

Wealth of Nations. It is about education as the creator of this new wealth. In this
book, in passing (since this doesn’t have much to do directly with the book’s core
proposition), Bhalla brings in Universal Basic Income (UBI) and the Speenhamland
system. This took my mind back several decades, to my student days, when one
read about poor laws in Britain. “The justices of Berkshire, meeting at the Pelikan
Inn, in Speenhamland, near Newbury, on May 6, 1795, in a time of great distress,
decided that subsidies in aid of wages should be granted in accordance with a scale
dependent upon the price of bread, so that a minimum income should be assured to
the poor irrespective of their earnings,” Surjit cites this quote from Karl Polyani’s
The great transformation. The original edition of this book was published in 1944.
Where was Polyani in 1944? Bennington College, and later, Columbia University in
the US. I find a lot of people quoting from Polyani’s book. Pelikan Inn? That’s not
how I remembered it from the works of Mark Blaug and Eric Hobsbawm. I
remembered it as Pelican Inn.

Indeed, it was Pelican Inn; references to it go back to 1646. There were two adjacent
inns, George and Pelican. When travel by coaches was important, travelers from
(and to) London often stopped at Newbury and frequented George and Pelican.
Pelican seems to have been more like stables and entertainment (there was a
Pelican Theatre), while George is where people stayed. I found this delightful poem
about Pelican Inn. “The famous inn at Speenhamland, That stands below the hill,
May well be called the Pelican, From its enormous bill.” By middle of the 19th
century, George and Pelican shut down. As for the Speenhamland System, it was
never as common as is often assumed. There was an attempt to legislate and make
it universal through the Poor Law Bill of 1796, but that failed. Whatever remained
was killed by the Poor Law Amendment Act of 1834. I tracked down the minutes of
the meeting of Berkshire Justices at Speenhamland, Newbury, on May 6, 1795, and
discovered something I hadn’t been aware of. This was a “General Meeting of the
Justices of this County, together with several discreet persons assembled by public
advertisement”.

“The Magistrates very earnestly recommend to the Farmers and others throughout
the county, to increase the pay of their Labourers in Proportion to the Present Price
of Provisions”. There was thus a scale of wage supplements, depending on number
of children in the household and price of bread. I am not sure this should be called

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3/22/2018 Much ado about an impractical idea | The Indian Express

UBI, though that’s how it is often presented. I hadn’t known that the trigger for the
Speenhamland meeting was an intervention by a court. “At the General Quarter
Sessions of the Peace for this County, held at Newbury on Tuesday the fourteenth
instant (of April 1795), the Court having taken into consideration the great
inequality of Labourers’ Wages, and the insufficiency of the same for necessary
support of an industrial man and his family; and it being the opinion of the
gentlemen assembled on the Grand Jury, that many parishes have not advanced
their labourers’ weekly pay in proportion to the very high price of corn and
provisions do.” Hence, there was a court directive to hold that meeting. Bad ideas
often emanate from the judiciary, not the executive. However, in fairness, the court
directive only mentioned prices of corn and other provisions. It didn’t mention
number of children in the household.

Bhalla thinks UBI is a terrible idea because it messes up incentives. That may well
be the case. I find it a terrible idea because I don’t know what UBI means. There is a
certain amount of public expenditure which the government (in its different layers)
makes. Surely, all that is not going to be converted into an equivalent UBI. Often
that public expenditure is in the form of collective goods, such as roads or railways,
or law and order and security. Surely, one is not going to tell a community: Here is
your equivalent money, go and build your own road. Therefore, any concrete UBI
presumably means public expenditure (such as through various subsidies) on
individual/household goods. In that event, why introduce new acronyms
unnecessarily? Why not simply call it DBT (direct benefit transfers)? Perhaps one
means universal social security (life insurance, medical insurance, pensions).
Again, it would be simpler to call it just that, instead of UBI. Unless there is
precision, UBI sounds suspiciously like what the Chinese used to call iron rice bowl.
This meant a guaranteed standard of living, irrespective of the worker’s efforts
(There is a story behind the expression “iron bowl”). It didn’t work and was
progressively abandoned. Karl Marx’s idea in Critique of the Gotha Programme,
“From each according to his ability, to each according to his needs”, hasn’t worked
as well. But Marx also acknowledged this could only happen “in a higher phase of
Communist society”, not immediately. Outside of China, I don’t think any socialist
country has attempted to implement it, not even partially. The former Soviet Union
always said it was in a lower stage of Communism.

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3/22/2018 Much ado about an impractical idea | The Indian Express

The writer is chairman, Economic Advisory Council to the PM. Views are personal

For all the latest Opinion News, download Indian Express App

More From Bibek Debroy

Diamonds aren’t forever

The price of the precious stone has little connection to its use value or marginal
utility...

I’d rather be a sparrow

But sparrow numbers are falling with changes in urban spaces. ..

J&K shows the way

State’s decision to evolve a uniform employment code is laudable. Done right, it could
serve as an example for labour law reform across India ..

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