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FINLAND FINDS OUT THAT FREE MONEY IS NOT SUCH A GOOD IDEA AFTER ALL

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I’ve been writing lately about something called “GBI” which stands for guaranteed basic income. GBI goes by other names including universal basic income, UBI, or just basic income, but the policy is the same regardless of the name.

The idea is that governments will guarantee every citizen a certain basic income as a matter of right. There is no means testing and no work requirement. The government just hands every man and woman a check every month whether rich or poor, young or old, employed or unemployed.

My reason for highlighting GBI is that you’re going to be hearing a lot more about it in the next two years. Leading Democratic Party politicians in the U.S. support GBI or a government guaranteed job as part of their platform. Polls show that about half the American people favor it as well.

The argument in favor is that GBI gives everyone a firm financial foundation on which they can seek other employment, turn down “lousy” jobs, get education and training, provide household services to family, friends and community, or maybe just be artists. The argument against GBI is that it encourages laziness, discourages productive work, is unaffordable by heavily indebted governments, and will produce inflation, which destroys savings and impedes capital formation.

This debate is not going away soon. But, what about hard evidence? Some countries around the world have already started GBI programs and the initial results are not favorable. This article reports on the fact that Finland has decided not to expand a pilot program of GBI.

The program’s results in terms of job gains were disappointing. This tends to support the views of those who claim that GBI discourages work rather that encourages it through training. This is a small sample; there will be a lot more discovered about the effects of GBI in the years ahead.

Meanwhile, the political debate is going full-speed ahead. This issue is not going away.

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