Jobs, UBI, and the Challenges of Today

Dr. Steve Davies is the Head of Education at the Institute for Economic Affairs. A historian, he graduated from St Andrews University in Scotland in 1976 and gained his Ph.D. from the same institution in 1984. He has authored several books, including Empiricism and History, and was co-editor with Nigel Ashford of The Dictionary of Conservative and Libertarian Thought. Our Simon Sarevski exchanged e-mails with him to talk about jobs and UBI, the challenges we are facing today, and more.

Simon Sarevski: Many people, both from the Left and the Right, think automation will destroy many jobs, bringing problems along with it. Do these assertions hold any water, and if so what are the problems we’ll have to tackle? 

Steve Davies: I am sceptical about the way these claims are often made. It is true that technological developments will destroy many jobs and even entire forms of employment. The assumption though is that that is all that will happen, so jobs will go leaving a lot of labour high and dry. Economic theory and the evidence of history is that the destruction of jobs is only half of the story. The other side is that those innovations also create jobs and entirely new forms of employment and that typically, the new jobs are larger in number than the old ones. There are actually more jobs net but different ones. So it is employment transformation, not destruction.

As an example, the advent of the internal combustion engine eliminated a huge number of jobs connected with horses but also created a huge number associated with the production and servicing of motor vehicles. We should not assume that just because this has always happened in the past it will also happen this time. The argument is that this time is different because AI is a different type of technology that replaces humans in total, not just their labor. However, there are strong reasons to be sceptical of this, all of the evidence so far is that AI will work in the same way that previous technologies have. It will enhance human labor and will bring about new ways of doing tasks that free up human beings to do other things.

This does not mean that there isn’t a challenge – there is and a big one – but it’s important to understand what the nature of that challenge is. It isn’t one of job destruction or of the destruction of income from labor (as many fear and hope). It’s of a transformation. The problems are to do with transition and adjustment.

In recent years Universal Basic Income (UBI) has been a hot topic, seeing small scale attempts (e.g. Finland). Is there a certain viewpoint on GMI from a classically liberal perspective? At the same time, what is your personal stance, if you don’t mind me asking?  

Steve Davies: I think this is an issue where there isn’t a clear classical liberal position nor a clear socialist one either. I do think there is a clear conservative one though. There’s a division that cuts across the normal argument between the two philosophies and economic systems. You can make a case for UBI that draws on liberal arguments and insights. I have done this myself (as I wrote a pamphlet for the Centre for Policy Studies back in the 1980s advocating one). Many classical liberals have supported either a UBI (A UBI is a specific form of the wider category of a Guaranteed Minimum Income) or some other form of GMI such as a negative income tax or demogrant system (e.g. James Buchanan, Milton Friedman, Juliet Rhys-Williams, Charles Murray).

Similarly, you can make a radical egalitarian case for one, drawing on the arguments of people like the young Marx. Both the socialist and classical liberal support for a UBI or equivalent can be traced back to Thomas Paine, who is a shared ancestral figure for both traditions. In both cases, it rests on the idea that a UBI will increase personal autonomy without giving power to the state or some kind of collective entity. For those on the egalitarian socialist side, it also means breaking the connection between income and work. The idea is that this will stop the alienation of people from their work and its products (hence why it fits with the ideas of the young Marx – not so much the mature Marx though).

There is also opposition from both liberals and socialists. One liberal objection is a fear of the practical politics of a UBI. You can only resolve that problem by making it a part of constitutional politics rather than routine politics – that was James Buchanan’s take – and that is difficult. The shared objection of people from both camps is that it undermines the social centrality and importance of productive work and relegates that to the sphere of play. So, the real division here is over how you evaluate work and its place in human life and that is a question that divides both liberals and socialists (conservatives, particularly Christian ones, are united in stressing the central place of work in a full life).

On the liberal side, there is the tradition, going back to Ricardo and all of the economists since him, that sees work as a cost or disutility that you put up with for the sake of the products. There is though a different tradition that you can trace back to evangelical Christianity and its secularised forms that sees work as essential for a good life and a positive good in itself.

On the socialist side, there’s one tradition that also goes back to classical economics, but with the wrinkle, Marx gives it, that the disutility of work comes from its alienated nature, which comes from the unequal ownership of the means of production. The practical conclusion is the same as with liberals though. The opposite view is the labour tradition, which makes paid work and its dignity central to politics and social theory (this again comes ultimately from Christian thinking, mainly Catholicism but also types of Protestantism).

I used to be solidly in the first kind of liberal thinking which is why I favoured a UBI but in the last few years, I have become much more sceptical, for both of the reasons given. The problem for me is that in practical politics, the only realistic alternative to a UBI going forward is either a collective compulsory social insurance scheme or a Universal Basic Services one and I have very strong civil liberties reservations about both of those.

Even if we consider GMI to be a morally flawed position, is it something we should be striving for, being the best solution we can achieve?

Steve Davies: I tend to think yes at the moment, at least in developed countries, and particularly in the Anglo-Saxon ones. My framework for thinking about it is this. In the modern world, there are broadly four approaches to welfare questions and the role of government in that. These are ideal types. The reality is always a mixture but with one predominant.

The first is the classical liberal one which we might call the ‘safety net – philanthropy – self-help’ one. Here the state provides a minimal level of welfare, the aim of which is simply to prevent outright destitution (so people don’t literally starve in the streets). It’s typically stigmatised to give an incentive to only use it in necessity. The main burden falls on civil society in the shape of families, organised charity (of a certain kind using certain methods), personal self-help and self-reliance, and collective self-help or mutual aid – this is the most important aspect – plus private insurance against risks, and saving or thrift. This is politically simply not viable right now, but liberals should advocate it and try to actually develop the practice of it.

The second is the idea of a ‘national minimum’ or as it is now called Universal Basic Service. This was the ideal for traditional socialist and labour movements, at least until the 1950s and (arguably) ‘actual existing socialism’ in the USSR and elsewhere. Here there are no state handouts or welfare payments. Instead, the state guarantees access for everyone to the goods and services necessary for a minimum standard of living by providing them either free of charge at the point of use/consumption or for a nominal flat rate charge, the purpose of which is to manage demand rather than fund anything. The usual list of goods and services is things like food, water, housing, energy, health services, education, and sanitation but it can include things like transport, leisure, entertainment, communications (used to be the post, now internet). These are paid for either through general taxation or through the state directly owning productive assets and using them to provide the goods and services. This is making a comeback at the moment on the left. The problem for liberals is obviously the civil liberties implications of this along with the way it elevates collective choice and shared values over personal choice and individual values.

The third is the collective social insurance model that we can trace back to Bismarck. It is the dominant one in much of Europe and East Asia – Singapore is the classic case of a system like this designed from scratch. It is also ethically collectivist, but it doesn’t give the state as central a role as the second one does. However, it doesn’t allow for personal choice and responsibility in the way the first does.

The fourth is the one that is dominant in the Anglo-Saxon countries and Scandinavia. In this, welfare increasingly takes the form of income transfers by the state, which are paid not on an insurance basis but some other kind of entitlement, which is typically cast in universal terms. There are two variants of this. In Scandinavia most of the benefits are universal so everyone gets them. Crucially, there’s been a move away from a citizenship entitlement to a residential one. The Anglo-Saxon countries use means testing so you have to be below a certain level of earned income to qualify. This is associated with an individualist ethos but a very different one from the first kind. In the first kind, you have an individualism that emphasises self-discipline and restraint. This second type emphasises an expressive individualism, much less stress on responsibility or restraint.

To return to your question. Both left and right in most countries support some version of the fourth type. The exception is countries with a Catholic tradition where the social insurance model is still strong (e.g. Germany). A GMI or specifically a UBI is a further development of the fourth type, its logical conclusion if you will. The problem is that the fourth model is under enormous stress for a number of reasons, particularly in the Anglo-Saxon countries because of the negative consequences of means-testing. That, rather than automation, is why there is so much talk about maybe moving to a UBI. In an ideal world, the first type of system would be a realistic option but it isn’t at the moment. The big risk is that a UBS model will win, which has very bad civil liberty and cultural implications from a liberal perspective.

So, the practical political question is whether to go for a UBI or a Singapore-style social insurance model as the better alternative (although not best in the absolute sense). That is as much a political judgement as anything. In some countries, it makes more sense to go for the social insurance model. In the UK that is very much where the public is but the problem is that it is very difficult to revert to that model after forty-plus years of using the fourth one, because of the long transition period that is required. So here the best bet probably is to support something like a GMI (given the alternative is likely a move to UBS) while trying to develop the practice and respectability of the first model.

“Who will build the roads” is an age-old question that classical liberals are always tasked with answering. I will not ask you who will build them, but if history can tell us of a time when, inside an already existing state, roads have been built and provided by the free market? 

Steve Davies: Yes. Eighteenth and early nineteenth-century Britain between roughly 1710 and 1850, through the mechanism of turnpike trusts (see here and here). In that period most of the roads were switched from being publicly maintained through the UK equivalent of a corvee to being maintained and run as toll roads by voluntary bodies called turnpike trusts. They issued debt that was used to do the initial capital work and serviced the debt and maintained the roads out of the proceeds of tolls. This meant that by 1850 the UK had the best and most dense highway system in Europe.

Today, in most countries, both advanced and those developing, outside of defense and law and order, the core functions of the state, the consensus seems to be, are social security, education, and pensions. Again, a walk down memory lane and not pure theory, can history teach us of a time where the free market was allowed to function freely, and did it achieve better results? 

Steve Davies: Actually, the government has been involved in these areas for a long time – the theory of government provision of services of that kind goes back to the Kameralists of seventeenth- and eighteenth-century Germany. There was a national state welfare system in England and Wales from 1603 (the Old Poor Law). So, there isn’t a kind of pure market or (more accurately) non-state era. However, there are many examples of those services being provided very effectively and on a widespread basis (i.e. not just to the elite) by non-state action. For education, the best source for the UK is the work of E. G. West. In the present world, you should see the work of James Tooley and his collaborators on low-cost private schooling in the developing world. The almost unstudied story on the welfare side (including health) is that of mutual aid and friendly societies. For the UK there is the work of David Green and Peter Gosden, for the US there is David Beito. There is extensive literature on this in German (Germany being the country where mutual aid was most fully developed apart perhaps from the Netherlands).

Another major example is the way these services were provided in the Islamic world through the mechanisms of zakat (a kind of voluntary wealth tax used to fund a charity that is one of the five pillars of the faith – the government can provide a collection service but they don’t actually run it) and waqf or perpetual charitable foundations – this was historically the main way education and health services were provided. There are also examples from classical Greek and Roman society and Chinese history. In all of these cases, the voluntary and non-state provision was better than the state equivalent.

The big challenge is this: there are two things governments can achieve when providing services of this kind that private action usually can’t. The first is uniformity. That isn’t a challenge for liberals – quite the opposite as it’s the variety and pluralism of the non-state supply that is one of its good features for liberals (the objection is on fundamentalist egalitarian grounds). The second is universality. This is trickier. The problem is that if you rely on voluntary action to provide these goods a small but persistent minority either will not (more likely) or cannot get them. The difficulty is that in some cases that have significant spillover effects, so the argument is that you need the state to ensure universality, either by making participation compulsory or by providing some kind of backup. The problem in practice is that this will tend to grow and crowd out the voluntary provision.

Having said that, I’m increasingly convinced that that was not the main reason behind the decline of voluntary provision of those three services, I now think that it was the private interest that drove that ultimately, on the part of commercial organisations, employers, and the desire of individuals to get rid of personal responsibilities. That raises interesting questions for liberals.

After 9/11 we saw one of the most intrusive policies in the West in the name of the “Patriot’s act.” Freedom of speech has been under attack and so have been the gun rights in the US. What are the biggest challenges in the free world today?  

Steve Davies: The growth of nationalism and national collectivism, a politics that combines cultural conservatism, nationalism, and economic dirigisme. The worst possible combination of policies and attitudes basically – this is fascism lite (or not-so-lite in some cases). It is a politics that is explicitly and foundationally anti-liberal – see the speeches of Orban for example.

Finally, although not directly related to the general topic of today’s conversation, I would like to end my interviews with this: How to find freedom in an unfree world?

Steve Davies: The title of a book by the late Harry Browne, which I strongly recommend. I would say the following.

1. Maintain, advocate and uphold liberal principles, both in the sense of defending them and in living personally according to them.
2. Take the advice of people like Harry Browne and Jeff Tucker. There are ways you can expand your own personal sphere of freedom and resist power even in a world that is generally unfree.
3. Do things at a personal and local level in association with others that help to build the institutions and practices of a free and open society. This is hugely important, far more than political activity (which should only be the icing on this cake, if you even get there). You can actually have an effect on the things immediately around you. Stop bitching about the big picture and get on with making things you can influence better.
4. Work to create a culture (things like literature, art, music, ways of living) that embodies and celebrates liberal insights such as tolerance, open-mindedness, respect for reality, personal responsibility.