A guest review by Koen Smets
In the same way that most drivers consider themselves better than average, I suspect most people consider themselves realists – not too optimistic, and not too pessimistic. I certainly do, and so I find myself right in the group at which Rutger Bregman’s is aimed.
[amazon_image id=”9082520303″ link=”true” target=”_blank” size=”medium” ]Utopia for Realists: The Case for a Universal Basic Income, Open Borders, and a 15-hour Workweek[/amazon_image]
It is Bregman’s first book to be published in English, bundling many ideas that he has written about before, notably in regular pieces for the Dutch website De Correspondent. Its subtitle, The case for a universal basic income, open borders, and a 15-hour work week, suggests it is not quite another lightweight campaigning pamphlet, but an ambitious attempt to show not just why these radical aspirations must be pursued but also how they can be realized. My expectations were raised accordingly. Unfortunately, rather falls short of its ambition.
Bregman starts off with a somewhat breathless catalogue of human achievements in health and wealth: we really have never had it so good. The mediaeval fantasy of the Land of Plenty has become reality. Nevertheless, we’re miserable, and for the first time ever we believe that children will be worse off than their parents. That makes it the ideal moment for a genuinely big project, according to Bregman the optimist.
15 hours per week
“Money is time,” Bregman observes. He channels Keynes and John Stuart Mill, both of whom had predicted we would work less and less, and shows how, for many decades, we have been buying time with our increased wealth. But by the late 1980s we suddenly stopped sacrificing money to get even more free time. Bregman blames social pressure, fuelled by commercial interests. Even so, is this is not simply playing into preferences inherent in human nature? Time is only one of the numerous things we can trade for money.
We may work less than our ancestors, but we are weighed down by stress, and overtime is rife. Bregman bombards the reader with solid and comprehensive research to show where it all went wrong, and his conclusion is straightforward. Working less will solve pretty much all our troubles: stress, climate change, accidents, unemployment, emancipation of women, and the ageing population. “We inhabitants of the Land of Plenty could work fewer than 15 hours a week by 2050, and earn the same amount as in 2000,” Bregman says, echoing Keynes’ prediction from 1930, which foresaw the same for 2030.
But if this is such a no-brainer, why are so few people actually working 15-hour weeks? Have today’s CEOs been abandoned by the enlightenment that made business leaders like Henry Ford and WK Kellogg cut the working week in the 1930s? How come the public sector, outside the harsh commercial realities of private enterprise, is not leading the way?
Bregman points at surveys which found that people from all over the world would prefer two weeks’ extra holiday over two weeks’ extra pay by a factor two. So apparently we want more leisure, but we work more. This is reminiscent of what David Ogilvy said: “People don’t think how they feel, they don’t say what they think and they don’t do what they say.” Bregman’s solution to this paradox is resolutely paternalistic: “Collective action – by companies, or better still, by countries.”
The best way of lifting people out of poverty is to give them money, says Bregman. No sign of paternalism here: “Put the choice in the hands of the poor,” he recommends, eloquently dismissing the myth that poor people cannot handle money. But alleviating poverty by giving one-off cash grants to poor and homeless people is hardly a solid case for a Universal Basic Income (UBI) – a steady income stream going to anyone who “has a pulse”.
The problem is not that people will turn into lazy couch potatoes – the Mincome experiment in Canada in the 1970s showed that people are nothing like the neoclassical homo economicus, who simplistically responds to incentives, and who would stop working if there was free money. There was barely a decline in working hours.
The problem is with the sums. Bregman claims that, “For the first time in history, we are actually rich enough to finance a sizable basic income.” But what size? A study by Matt Bruenig estimates the cost for eradicating poverty in the USA at “only $175 million”. Distributed equally over the US population, every person would get about $550 per year, or just over $10 per week.
And even that needs to come from somewhere – technology, Bregman believes. The robots will come and take our jobs, and that is a good thing: it means we can, “Reject the dogma that you have to work for a living.” Just tax the robots. Sounds simple, but it conceals huge complexity: automation applies differently to different jobs and in different countries.
The world came very close to an actual, real, nationwide unconditional income for poor families – in the USA, no less. Bregman devotes an entire chapter to the rise and fall of a seminal UBI under president Richard Nixon in 1969. But thanks to rhetoric, defeat was snatched from the jaws of victory: the prospect of “inciting the poor to even greater idleness”, based on a tendentious analysis of the welfare system in Speenhamland in 1830s England, was the death knell of the proposal.
Another of Bregman’s bêtes noires is the gap between the wage for a job and its societal usefulness. Why, he wonders, should wealth shifters like bankers earn more than wealth creators like teachers or indeed garbage collectors? He might as well get worked up about the fact that even the most expensive litre bottle of water costs a lot less than a kilo of gold.
Are there really ever more people earning money without contributing anything of tangible value to society? Once all societal needs – food, shelter, healthcare, education – are fulfilled, things shift to the individual transaction level. We may regret the fact that there are so many lawyers in the US, and be puzzled by the fact that this doesn’t mean Americans are better protected than citizens of countries with fewer attorneys. But somehow, every lawyer is – we may assume – deriving her income from someone who willingly pays her for her services, money her client has a choice to spend differently. Unless we can show why this is not a mutually beneficial transaction, value – in the eye of the beholder – is being created.
Bregman’s solution is simple, though: “Higher taxes would get more people to do work that’s useful.” It seems to escape him that a higher tax doesn’t discriminate between the incomes of people who shift wealth and those who create wealth. It penalizes both in the same way.
Redistribution and efficiency
Much of the book is balanced and factual, but on a few occasions Bregman morphs into a campaigner on speed. There is a weird rant against advertising. There is a bizarre attack on the market economy (“The modern marketplace is equally uninterested in usefulness, quality, and innovation. All that really matters is profit.”) There is a peculiar condemnation of our “fixation on ‘efficiency’ and ‘gains’, as though society were nothing but one big production line.” These contribute little or nothing to the central ideas, and the style erodes the credibility of the book’s other arguments..
Bregman – no doubt to the delight of the owner of this blog! – also devotes almost an entire chapter to the most widely used instrument for measuring progress, Gross Domestic Product, taking great relish in demolishing it. But he is really kicking in an open door: the shortcomings of the GDP are well-known and well-documented. None of the alternatives, from Gross National Happiness and the Genuine Progress Indicator to the Index of Sustainable Economic Welfare and the OECD’s Better Life Index satisfy him either.
By now, it should not be a surprise that Bregman advocates a larger public sector: they can leverage activities that “cannot be made more efficient”, such as education and healthcare. He believes that, “The more efficient our factories and our computers, the less efficient our healthcare and education need to be; that is, the more time we have left to attend to the old and infirm and to organize education on a more personal scale.” This is an idiosyncratic interpretation of the concept of efficiency.
Bregman seems to miss the fact that we are economic beings: if we sacrifice something, whether it’s time, effort or money, we want to get something in return that we feel is worth it. We want to be efficient when it’s not the task we are enjoying, but the outcome of the task. That is not only why the Land of Plenty is so appealing, but also why we have made so much progress towards it.
A larger public sector without any notion of efficiency sounds like a dangerous path to take. Yet Bregman says, “Governing by numbers is the last resort of a country that no longer knows what it wants, a country with no vision of utopia,” as if the amount of subsidy the state will give to ‘inefficient’ activities, and the ways in which it will be able to raise the necessary revenue are not numbers that, eventually, matter greatly.
But Bregman also has a libertarian streak. He criticizes conventional aid for spending pitifully small amounts of money to projects with questionable outcomes. If we were really serious about relieving global poverty, we would open our Western borders. That would make the world twice as rich as it is now, and boost wealth by sixty-five trillion dollars.
So what stops us? We are hypocrites, hiding behind fallacious objections. Migrants will take our jobs, they will force our wages down, they are too lazy to work, and they’ll never go back. Bregman counters them all, as in the best parts of the book, with plenty of evidence. But the angst across the EU in relation to a population of refugees amounting to barely 1% of its population shows that we’re some way off accepting the economic logic of the win-win argument of open borders.
A disappointed realist
In the final chapter, Bregman wonders whether he might be caught out by confirmation bias: “If I’m being honest, I sometimes wonder if I’d even let myself notice if the evidence were pointing another way. Would I be observant enough – or brave enough – to have a change of heart?”
Ultimately, the book majors on explaining why its three central radical thoughts are good ideas – and this is indeed a hallmark of confirmation bias. Looking at the arguments against, and putting up solid counterarguments is not enough. “The question is not can new ideas defeat old ones; the question is how,” says Bregman. And on that last question, the answers are sadly lacking.
A realist would have wanted to see how the loss and risk aversion that prevent the West from opening up its borders to economic migrants could be conquered.
People in the rich West have plenty of options to make different trade-offs between time and money. The barriers to adopting a 15-hour week are not high, and both employers and employees would be fools not to take advantage of the apparent win-win situation it offers. Yet it’s not happening. A realist would have wanted to see an explanation for this reluctance, and ideas on how to overcome it.
And above all, a realist would have liked to see solutions to the fundamental issue with a UBI: how to pay for it. The problem, as Bregman explains, is not that the UBI will be a disincentive to work. It is that, in order to raise enough money to provide a UBI that is high enough to live on, it is the taxation on high incomes that will act as a disincentive. “Only a fraction of our prosperity is due to our own exertions,” says Bregman. But the other fraction is not generated without some exertion. And if there is not enough incentive for people to actually put in the effort to produce 100%, even if they’re only personally entitled to 10%, the other 90% remains elusive.
Koen Smets is an accidental behavioural economist, who works as an organization development specialist. He uses elements from both orthodox microeconomics and behavioural economics to bring about behavioural change. He is on Twitter as @koenfucius