The dawn of UBI?
Written by Juan Palenzuela, Associate
Edited by David Gaffney, Partner
Last week was a good one for the proponents of universal basic income (UBI). The policy, which until recently was little more than a fringe idea, is now gaining real traction across the developed world.
In Spain, the minister for economic affairs announced that they are working on a version of the policy, and that they would like to persist with it after the pandemic too. In the UK, a new paper from Reform Scotland calling for a £5,200 basic annual income for adults was welcomed by Scotland’s first minister, Nicola Sturgeon. Twitter’s chief executive Jack Dorsey, meanwhile, committed $1bn to support UBI experiments once the pandemic is over, among other things.
The policy also gained some unexpected backers. The Pope, who does not typically offer an opinion on specific policies, called for a universal basic wage to be considered, one which “would acknowledge and dignify the noble, essential tasks you (workers) carry out”.
With momentum apparently building behind the idea, it would not be surprising to see more figures follow suit in the coming days, and perhaps we could even see the policy materialise in countries other than Spain. These are extraordinary times, after all, which will lead to extraordinary measures.
The real question, though, is whether the policy can remain in the mainstream after the pandemic.
As Nobel economists Esther Duflo and Abhijit Banerjee have pointed out in the past, economic (dis)incentives are probably a bit overrated; people will not stop working if they are to receive regular payments because, in general, people work for more than just their wages.
But some remain hesitant and understandably so. Citizens’ behaviour and choices adapt when they can expect regular payments in advance.
Nonetheless, it is becoming increasingly tone deaf to ignore the trickle-down impact that universal income could have, especially in the immediate aftermath of this crisis. Once millions of people that were left out of work hit the streets once again, we cannot simply rely on their desire and ability to seek a better life to smooth things out.
In the face of the largest sudden economic contraction we may have seen since the beginning of recorded economic history, policy makers may feel compelled to give basic income a shot.
The UK government is set to announce a three week extension to the lockdown on Thursday, so that measures will remain in place until at least 7 May, according to tThe Mirror. In a statement yesterday, first secretary of state Dominic Raab said that although the measures are working, "we are still not past the peak of this virus".
Shortly after dropping out from the race to be the Democrats’ nominee for the US presidential election, Bernie Sanders announced through a video conference that he endorsed Joe Biden for November’s vote. In 2016, he was criticised for delaying until July before he endorsed the Democratic nominee, Hillary Clinton.
China reported yesterday its highest spike in Covid-19 cases in six weeks, mainly the consequence of Chinese nationals returning from Russia. Authorities have swiftly quarantined all suspected arrivals in an effort to avoid a second wave of infections.
Business and economy
The world’s top producers of oil, OPEC and Russia, agreed on a deal over the weekend to cut output and put an end to a bitter price war. The OPEC+ group agreed to cut 9.7 million barrels a day, which is just below the initial proposal of 10 million.
SoftBank, the Japanese manager of the $100bn Vision Fund, said that it expects to lose nearly $17bn this year as a result of market upheaval. It signifies Softbank’s first loss in 15 years.
In an open letter issued yesterday, Huawei urged the UK government to keep its commitment and allow the company to play a role in the deployment of 5G in the UK. Since the beginning of the pandemic, data usage has soared, elevating the importance of mobile and broadband networks. As more sensitive data is transferred through those networks, some policymakers have been compelled to revisit Huawei’s deal once again.
Columns of note
The editorial board of the Financial Times writes this morning on the new oil deal reached over the weekend, arguing that it shows the depth of the hole into which the global economy has sunk.
In The Times, Hugo Rifkind ponders the difficulties facing an archaic parliament as the need to adopt new technologies in order to continue to function increases.
Source: Evening Standard
The week ahead
JPMorgan Chase and Bank of America will be kicking off the week by reporting earnings today and tomorrow respectively. Both banks are under pressure on multiple fronts to weather the storm of the pandemic.
America’s retail sales numbers for March will be also published on Wednesday, with the expectation that sales will have fallen substantially due to the lockdown but economists waiting nervously to see the extent of that fall.
Lastly, China will publish Q1 GDP and industrial production figures on Thursday. Those figures will give some guidance as to what sort of economic damage the rest of the world can expect from Covid-19.
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In 1925, the main manufacturers of lightbulbs came together to create the Phoebus cartel, which controlled the global lightbulb market for more than 15 years and worked to remove long-lasting bulbs from the market to maximise profits.
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