The DMK’s promise of monthly assistance of ₹1,000 to all ration-card holding women has set off an interesting and acrimonious debate on an entirely nascent social welfare concept – universal basic income (UBI).
Even for a state with a political history of competitive welfarism, the announcement by the DMK leader MK Stalin marks a new high in populist economics.
Commentators in the social media have compared the DMK announcement with the UBI, the experimental concept that has been tried in some countries, either criticising it as an unscientific measure or supporting it as an effective tool to improve the condition of women.
UBI as a concept has been actively mooted since the 2008 global economic crisis and has gained more traction since the COVID-19 pandemic, but it has a history preceding both.
The unlikely place where a government-backed, direct, unconditional cash transfer scheme was started and is still in force is in the US state of Alaska. The oil-rich state set up a fund, the Alaska Permanent Fund, way back in the 1980s to pay a cash dividend of sorts from oil revenues directly to all qualifying people, which was a simple test of residency.
Iran is another country that has been running a direct cash assistance scheme since 2011. The scheme, which guarantees a significant payout to all citizens, was rolled out to phase out some subsidy schemes for utilities such as water, electricity, etc.
A London-based Iranian journalist told me the scheme envisaged payment of some 455,000 rials (approx $50 at 2011 exchange rates) per head (not per family) per month to all Iranians in 2011.
He said the government, facing continuous political and economic crises ever since, has tried to reduce the scope of the scheme but without much success.
The scheme has also been rendered ineffective as the rial has been reduced to worthless paper money due to the steep slide of the economy and the US sanctions. (One dollar can buy 200,000 rials now.) The dole money was enough to pay for about 4.5 kg of beef at 2011 prices; now it buys the beleaguered citizens only half a kilo of beef, he said.
Interestingly, there is no UBI yet in operation in western Europe, which has a history of welfarism in what otherwise is a capitalistic politico-economic landscape.
Finland was the only country that ran a small experiment with UBI – that was in 2017 when it ran the scheme to a limited group of 2,000 unemployed citizens. The selected people were paid €560 (₹48,654) per month. The scheme was stopped by December 2018. While initial reports claimed the scheme was a “flop”, later evaluations were more nuanced about its impact, claiming it improved the overall sense of wellbeing of the beneficiaries.
Targeted vs Universal
Basically, a welfare scheme is mostly means-tested – ie, it targets beneficiaries on the basis of a set criterion such as income.
Advocates of this type of approach say means-testing is effective as it does not lead to waste of public funds on “undeserving” sections of the population and targets only the needy.
However, opponents of means-testing argue that it is ridden with obstacles such as errors in inclusion and exclusion of correct beneficiaries, stigma attached to beneficiaries, etc. When you make the payouts as a matter of right or guaranteed entitlement, there is also less transaction cost, in the sense, there may not be the additional cost in applying for the “benefit”. The money is deposited in your bank account.
An example is ‘child benefit’, a monthly payout for families with children in the UK.
The pandemic has revived the debate over UBI in many parts of the world, including Britain. In March last year, when the pandemic was at its peak in the country, a group of 170 members of the UK parliament wrote to the Chancellor, Rishi Sunak, to consider launching a universal basic income scheme to protect the citizens hit by the economic cost of the lockdowns and the consequent job losses. The government’s furlough scheme (through which it paid up to 80 per cent of the wages of workers of all companies and businesses if they were still kept on rolls) helped to a certain extent only, as many people fell through the cracks in the scheme, they said.
The chancellor, however, rejected the demand, saying the government had provided adequate protection to the vulnerable sections of the public through £7 billion (₹710 billion) investment in improving the welfare system.
Tamil Nadu – A Pioneer in Welfarism
Tamil Nadu, with a history of welfare schemes, has been gradually universalising such welfare measures over the past few decades.
From the midday meals scheme of the Kamaraj era, which was restricted to poor students in primary schools, welfarism was extended to gradually universalising the scheme to all school-going students through the 1980s and ’90s. The midday meals scheme itself was not new in Tamil Nadu, as the first such effort was started by the Justice Party-run Madras Corporation in 1920 in a few corporation schools.
The welfarism in Tamil Nadu is unique in India – with the state leading in introducing and successfully implementing many welfare schemes; economists such as Amartya Sen and Jean Drèze have lauded the state in their 2013 book, An Uncertain Glory – India and Its Contradictions, for its inclusive social and economic policies.
In this context, the DMK’s 10-year vision document for the state makes an audacious promise to make a giant leap in this trajectory of welfarism, by promising direct economic assistance to women, not as a sop but as entitlement. The phraseology used by the DMK – ‘urimai thogai’ instead of the usual ‘udhavi thogai’ – is daring in the sense that it makes the people reimagine the role of their government in ensuring their progress.
All, of course, subject to the caveat that this scheme would be possible only if conditions like better governance, prudent fiscal management and eradication of corruption are met. In a state that is being crushed under the load of a massive debt that is set to cross ₹5 lakh crore in 2021-22, that seems to be a massive challenge.
(The writer is a senior journalist based in London)