When it comes to Universal Basic Income and other attempts to use government as a medium of wealth transfers, most opponents simply focus on the classical “incentive problem” (that is, if you subsidize non-productivity, you will keep it in existence). However, besides the incentive problem, which is of course a legitimate concern, the much more serious systemic problem with UBI is that it shifts savings from their ability to invest in factors of production to immediate consumption.
It is true that there is a temporary and fleeting situation of difficulty-alleviation. After all, for the individual who cannot pay his bill, a guaranteed income is wondrous news. But the more that capital accumulation is disallowed, the less wealth there will be in the years to come. This is why it is preferable to let transfers of wealth be voluntary situations in which philanthropists, charities, and local sources provide these measures on a case by case basis.
When a system is set up that directs tens of millions of dollars on a constant, guaranteed basis away from capital production and toward consumption, there is a deep and penetrating undermining of the entire course of economic progress. It is, to be a frank, a “constant and guaranteed” eroding of society’s economic potential. But the entire western world is the product of capital accumulation and investment.
What we see around us is literally the result of past refusal to consume, the widespread conscious decision to withhold funds that otherwise could have been spent on goods that satisfy the most immediate desires. If during the Industrial revolution guaranteed income was set in motion rather than investment, our entire generation would be vastly poorer and less populated than we are. The poor of today are wealthier than the poor of generations past precisely because of the capital build up.
As a simple exercise of mathematics, the distributionists will point out that X amount of dollars taken from the rich will be able to fund Y amount of desirable goods and services for the poor. But to engage in such a distribution would have only this immediate effect in the near term. By distributing savings from capital to consumption, the long term result would be a curtailing of potential goods and services which benefit the poor by making them more accessible, more affordable, and therefore raising the poor out of their poverty.
All schemes of distribution are harmful on a scale of how greatly they undermine the current and potential capital stock. To transfer $1 million dollars may take away a few potential jobs. And in a wealthy society, this would barely be noticeable. But to transfer $10 billion on a constant basis causes great future pain; it is the path toward economic regression. The more capital stock in a society, the longer it takes to undermine the entire economy. But the damage done is clear and obvious to all those who understand that production, not consumption, is the foundation of mass wealth.
Everything around us is the product of capital investment. And our children and grandchildren will have a standard of living that reflects our ability to save and invest in the present. Alleviation of impoverishment in the years to come depend on investment today. UBI is a revolt against rising standards of living.