The polity that is Sikkim

High in the Himalayas, Sikkim is one of the tiniest states in India. But it is about to embark on an experiment of global interest.

Sikkim’s ruling party has announced an ambitious plan to implement a universal basic income for every one of its 610,577 citizens.

If successful, the scheme would represent the largest trial run anywhere in the world…

Here is the WaPo article, overall I am most bullish about the UBI idea for very poor countries, where the humanitarian upside is greater and the incentive to work still remains.  Elsewhere, Buddhist poker player donates $600,000 to charity.

Comments

A politician proposes a UBI just before an election, without disclosing the payment amount, total cost or source of funds. News of global interest!

Meh. Your cynicism is too much for a Friday. Here's a short history of Sikkim:

5. Protectorate of Sikkim (1947-75). For those of you who are map enthusiasts, Sikkim is that spot in India located between the tiny countries of Nepal and Bhutan. While Kathmandu and Thimphu opted for sovereignty, Sikkim, after India became independent of the British Empire, opted to transfer its protectorate status from London to New Delhi, and it remained a protectorate until 1975, when the monarchy was overthrown and a popular referendum opted to join India rather become a sovereign state.

Minor quibble, Bhutan is tiny but Nepal isn't really.

But that whole area is interesting and people don't know a lot about it. When you picture India you think hot, crowded, urban, sea level. Not the Himalayas. India is fascinatingly diverse.

What's your life expectancy as an independent polity in India's neighborhood?

Why is the religion of a donor newsworthy? Or is it the amount?

The article is all about Buddhism 1) being a motive for him donating winnings and 2) potentially having moral conflicts with poker playing.

>>> "If successful, the scheme would..."

oh, there's some broad uncertainty at GMU whether this "scheme" might be successful ?

apparently economists have never before considered this general issue

All things save faith, death and gravity are uncertain.

Apparently commenters have never before considered this general issue ;)

In terms of what economists consider and fail to consider, commenters should consider that Tyler is both "bullish" on UBI (as applied to Sikkim) and steadfastly opposed to returning the proceeds of a carbon tax to the public in the US.

Of course, for the moment at least, Sikkim is a very different place from the US. But any carbon tax sever enough to have a meaningful effect on "global warming" would bring effective US consumption much closer to Sikkim's level. That, indeed, is the whole point. A carbon tax which fails to bring American standards of living to Third World levels has failed to achieve it's sole (nominal) purpose.

I am not exaggerating. Ask how much any actually proposed carbon tax will theoretically reduce "global warming" a hundred years in the future and the answer will be expressed in tenths of a degree C.

Gravity is sort of uncertain, as no one has any idea how it works.

I wouldn't bet against it though

Absolutely correct.

In other news, a small Indian state has created a direct, non-prorated welfare program funded by general revenue, with no sunsets. It's anticipated this program will grow moving forward in the future and will not have any discernable impact on productivity or labor force participation. We hope you'll join us for an in-depth expose in 10 years time after chaos reigns and their prime minister has been deposed.

News at 11.

Will Sikkim open its borders, too? How far away in Bangladesh, formerly East Pakistan?

Speaking of tiny polities, Iceland with fewer than 400,000 citizens was (my opinion) the only western nation that got right its national response to the 2008 global financial catastrophe.

Since Iceland has roughly the population of Bakersfield CA, and the same number of international banks HQed in both places, it's hard to generalize their 2008 response to actual countries.

I'm doing this on the fly. Some of it is repetitive.

OK. Compared to the US and EU nations, Iceland's banks' defaulted securities were very small.

However, the government of Iceland treated the defaulted securities of its banks differently. Most of the EU nations and US paid all banks' liabilities, which transferred the securities at par to central banks and the people. Iceland effectively told the international creditors they would be paid when and if monies were collected on the defaulted bank securities. In other words, the people and government of Iceland did not incur the massive liabilities and losses of Icelandic banks.

Several EU nations sued Iceland to try to get Iceland to pay in full their banks'/citizens' defaulted instruments. They lost.

Iceland didn't pay.

Iceland prosecuted and jailed 26 corrupt bankers responsible for their banks' insolvencies. Did the US or any EU nation?

Iceland had one of the strongest recoveries.

Iceland refused to go the austerity route keeping social programs intact when Icelanders most needed them.

Iceland’s three major banks collapsed resulting in losses of $114 billion. The GDP was only $19 billion. In October 2008, Iceland seized domestic operations of the major banks and established new banks to handle them. They did not guaranty or assume any of the foreign debts. Those stayed with the original banks in bankruptcy and foreign and domestic creditors would be paid from collections of assets, not by the Icelandic people.

I hope that helps.

In which Dick explains that the US should have nationalized the banks like Iceland did, like the raging commie he is.

Dick, you may also want to look into the relative importance of the US banking system and currency to the entire global capitalist order, vs Iceland's.

Still more: "Iceland refused to go the austerity route keeping social programs intact when Icelanders most needed them."

So you're big on social programs? Kind of off-brand from your usual posts.

"In which Dick explains that the US should have nationalized the banks like Iceland did"

Yeah, while not disagreeing with the idea that Iceland's policies may have been good ones, some of the key ones on that list include government takeover of banks, and refusing to pay for defaulted loans.

Fidel Castro and Hugo Chavez would've approved.

They probably were good ones for a city, sorry I mean country the size of Bakersfield. Always cracks me up when people suggest ideas for the US by saying look at Iceland, or even Singapore or Denmark.

Apples and oranges.

Also good arguments for breaking large states up into smaller scale ones that can achieve those policy models. Or at least doing as much as can be done in that direction within a federal structure for large states.

LOL. Comrade Dick, suggests the USA become the USSA? Is that your 5 year plan, generalissimo of the oppressed?

An unconditional universal basic income must be helpful to get you out of bed, not to allow you stay in bed… and it has to be fiscally sustainable… meaning not paid to us by taking on public debt that our grandchildren will have to service.
Carbon taxes are one perfect partial revenue source.
http://myubi.blogspot.com/2017/01/my-universal-basic-income.html

"I am most bullish about the UBI idea for very poor countries"

However, it appears that, although India is a poor country, Sikkim is not a poor province. It would be like implementing UBI on the Upper East Side.

Tyler, I'm fairly shocked that you are most bullish on UBI for developing countries, based on *Stubborn Attachments*.

Shouldn't they be doing everything they can to maximize growth, to catch up to the frontier? The taxation necessary for UBI will slow that down!

I say this non-facetiously, indeed this view is in fact my belief.

Sikkim is actually one of the more prosperous states in India. Its PCI is around twice that of India if I recall right

Not a poor country by any means

India is poor. Twice India is less poor relatively speaking but still poor absolutely speaking.

No

$17-18K PCI (which is where Sikkim is) is not poor.

Sikkim is about as rich as US was in 1970.

Nobody I know refers to 1970 US as a poor country

Sorry. Mexico is considered poor (at $18/19K per) and Sikkim is even poorer than that. To use Presidential language, its still a sh*thole. Anyway I'd rather have the worst house (Mexico) in the best neighborhood (North America) than the best house (Sikkim) in the worst neighborhood (India).

So when do they build their own wall, and who pays?

The Mexicans will pay, BenK, touche? No way Jose, you have to pay to play! G'day.

Bonus trivia: Richard Nixon and Daniel Patrick Moynihan collaborated (!) on sort-of Universal Basic Income proposal back in the early 1970s, Kevin Phillips once wrote, but it was not universal in that it was limited to poor people. Still, the people could spend the guaranteed money on whatever they wished, even booze, thus maximizing their marginal utility. Small steps towards a much better world as the site says.

I guess Moynihan collaborated with Nixon because Moynihan served as Assistant to Nixon for Domestic Policy, later as Counselor to Nixon, and lastly as Ambassador to India. Nixon and Moynihan's version of a UBI, called the Family Assistant Plan, was rejected by . . . . . . . liberal Democrats, which caused Moynihan to leave the administration after suffering a bout of depression from the rejection. In politics, you never know who your friends are.

Does the federal system in India differs from that of the USA?

The US Federal government has/had (did the Trump tax law end it?) a back-handed form of not-universal UBI for families with both incomes and dependent children: the earned income credit.

Who needs USA UBI when anyone can crash the southern border and immediately get free education, free food, free health, free housing, etc.?

"anyone can crash the southern border and immediately get free education, free food, free health, free housing, etc.?"

Yeah this is complete bullshit

True, but on the other hand any pregnant woman "can crash the southern border and immediately get free education, free food, free health," for her child.

It keeps me baffled why so many people miss the case in Iran, in which a massive cash payment program is going on, covering almost 60 million people. (So the case mentioned in the above post would _not_ represent the largest trial run anywhere in the world). Yes, it was pitched as a cash compensation for removing energy subsidies, and yes, inflation has diminished the value of payments drastically, but still it's something worth noticing.

Here is a paper on the experience:
https://www.tandfonline.com/doi/abs/10.1080/1540496X.2015.1080512

Actually I meant this one:
https://www.sciencedirect.com/science/article/pii/S0304387818306084

It's buried in the article, but this Vox.com piece has a couple good paragraphs on the Iranian experiment as well:

Salehi-Isfahani and a colleague, Mohammad Mostafavi-Dehzooei, have studied the Iranian basic income’s effect on work. “Our overall conclusion," they write, "is that the program did not affect labor supply in any appreciable way." That’s especially astounding given the size of the benefit: In 2011, when it was introduced, it provided about 29 percent of the median household income on average. In the US, that would mean paying out $16,390 to the average family.

"It keeps me baffled why so many people miss the case in Iran, in which a massive cash payment program is going on, covering almost 60 million people."

People hated that Obama gave Iran cash for his "nuclear deal". I suppose them watching it get distributed is like getting screwed twice. I wouldn't want to pay attention to it either.

More money down the sh*thole.

But but but..... This morning Tyler said there were too many other, better things to do with cash than distribute it to people.... How about this, we peg the ubi tax to carbon footprint, now Tyler's onboard, right?

"for every one of its 610,577 citizens. (...) If successful, the scheme would represent the largest trial run anywhere in the world"

Alaska has more population than Sikkin - 739,795 inhabitants in 2017

Can anyone explain how a red state like Alaska runs one of the largest socialist programs in the world? Is it because they can see Russia from their house?

Everyone in Alaska is a true pro-American god-fearing Republican-voting patriot. Therefore, whatever they do is right and just, and not socialism.

If you've got to do something with your oil and gas money, may as well redistribute it to the people and tackle their high cost of living? Rather than leave more than you have to in the pockets of industry.

More broadly: How much does opposing a socialist, state-run economy mean enabling a class or group of people to profiteer off extracted fossil fuel wealth without sharing that with the people who live in the country? Not a purely rhetorical question.

The Alaska constitution (I believe written before the discovery of major oil in the state) says something like, all mineral rights below 2 feet underground belong to the people. Given this constraint, it seems like the only relevant alternative to a dividend is just to squander it all in a bloated state general fund. Which is more socialist?

"Overall I am most bullish about the UBI idea for very poor countries, where the humanitarian upside is greater and the incentive to work still remains."

I think of this more along the lines that in a poor country, UBI does the most good relative to cost. But I'd appreciate if you could expand on this notion. I know you've at least glanced at Lowrey's book, but one thing I took from it is that US$12K would not affect the will to work for most people in affluent countries. If you follow the FI/RE discussion boards, I find it interesting how often the people who reach FI decide not to RE. If you've posted on these ideas at length, I think I've maybe missed those posts. If not, please fire away.

TC: overall I am most bullish about the UBI idea for very poor countries

Contrarian take, reasons to be least bullish about UBI for poor countries:

1) Poor countries have the most plausible alternative channels for state spending; roads, huge public health returns to small interventions, primary education, a stable police, courts and the rule of law, decent government salaries as an alternative to corruption. UBI seems worse than much of this. They also further have limited capacity for state spending and are most likely to face tradeoff in these against UBI.

Rich countries in contrast, have lots of obviously useless state spending; bizarre diversity quangos, more or less useless or harmful university education, marginal improvements on mortality at even doubling public health spending, patterns of state spending that reward willingness to lie about reality (consider our morally bankrupt and dishonest "public intellectuals"). UBI seems better than much of this.

2) In terms of incentives, to consider is that it seems more likely that work in poor countries actually means something.

That is to say, people do jobs that generate concrete things to afford stuff that they need.

In very rich countries, people more frequently do abstract tasks to generate residual income to afford luxury consumption. Rich societies are more "decadent" societies.

Losing a little incentive to work doesn't mean so much for us, if it mainly hits what is much of society's makework to fuel luxury consumption. It matters a lot to them if it reduces incentives to build a qualitatively superior economy to meet concrete welfare improving material needs.

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