My Own Private Basic Income

Photo credit: fedee P. CC-BY-NC-ND.

I have a private basic income – a small, regular cash income without means test or work requirement. It’s probably large enough to meet my basic needs. And I got it thanks to privilege, nepotism, and two big lucky breaks.

My first big lucky break happened in 2009 when Georgetown University hired me as a philosophy professor on their campus in Qatar. Georgetown-Qatar,  funded entirely by the Qatar government, has to pay an enormous premium to get faculty to agree to live and work in Qatar. I get paid three times as much as my wife. I teach half as many classes. She’s a full professor. I’m only an associate.

Qatar can pay more than US universities because of their own series of lucky breaks that put them in control of enormously valuable resources. Their position today comes largely from decisions made about a century ago. When the Ottoman Empire was breaking up, Britain and France arbitrarily drew lines on the map to create what became the states of the Middle East. They had no idea those lines would eventually give some of those states enormous amounts of oil and gas and leave others desperately poor.

The joy of options

I ‘earn’ my salary by doing a job few others are both willing and able to do. To some extent wages compensate for other disadvantages of the job. But this equalization is only partial, and more importantly, it only occurs among people with similar options.

I had better options than most people in the world. My white, American upper-middle class privilege gave me the opportunity to get the qualifications and the flexibility to take this job. For every highly paid professional ‘expat’ in Qatar like me, there are maybe eight or ten extra-low paid ‘migrant laborers’, some of whom make as little as $200 a month. They live in dorms for years at a time, separated from their families. They are unfree to quit or to change employers. They are unfree to leave the country without their employers’ permission.

There is no combination of hard work and grit that could have put any one of these workers in my position from their starting point in life. Nor is there a combination of bad choices that could conceivably put me in their position from my starting point.

I see these workers often. They clean the toilets at my university. They bring me tea if I want it. They are, on average, several inches shorter than me thanks to childhood malnutrition, because human resource companies in Qatar have scoured the earth looking for the most vulnerable, cheapest labor.  I’m paid partly because I’m willing to see unfree laborers up close rather than to stay home and consume the products of billions of workers like them, without having to see them.

I do not ‘earn’ my salary in the sense of doing more useful work. I’m a competent professor, but I’m not outstanding. My work is no more valuable than the work other academics do – perhaps less so since my students are already so wealthy they need education much less than the average person around the world.

I receive a high salary because I was lucky enough to be in the position to serve the whims of those who own resources and the stuff we make out of them. There are exceptions, but on the whole, the highest paid people are those advantageously placed serve the wealthy. Doctors who perform cosmetic surgery for those people make far more than doctors who treat malnourished children.

And the power of ownership

The real money isn’t in doing stuff for the people who own stuff. It’s in being one of the people who owns stuff. My chance to do that was my second big lucky break.

A few years before I left for Qatar, my brother returned to the Midwestern United States with a significant amount of money he’d saved while teaching English. With that money, he’d bought a couple houses, fixed them up, and rented them out. Although he made a very good rate of return, he had no more money to invest. He had less money because he was now teaching underprivileged children in a public school in South Bend, Indiana instead of teaching relatively wealthy people in Tokyo.

We were a perfect match. I had the money but not the time or skills. He had the time and skills but not the money. And as brothers we had a bond of trust. No one is going to give tens of thousands of dollars every year to some guy who owned a couple of houses and said he knew how to manage more, but I’d give it to my brother. Nepotism made my business possible.

South Bend is a fabulous place for small investors to get into real estate. Thanks to overbuilding 50 years ago, houses there are extremely cheap to buy, but not as cheap to rent. So, we needed less money to buy in and made a higher return than most real estate investors in most US cities.

I also benefited because the US tax structure is extremely favorable to business owners in general, landlords in particular. Capital gains are taxed far less than income, and people who don’t need their income are taxed less than people who do. My brother needs to live off of the salary our business pays him, and so he pays income tax on it. My wife and I don’t need the money we make from owning most of the business. We live off the salaries of our jobs, and reinvest virtually our entire share of the business. These reinvestments count as “losses,” and so officially we have never made any income or paid income taxes on our share of the business.

The business pays property taxes, but they average about $15 per house, per month – minuscule compared to the rent we make. Our business needs to maintain the houses, but the cost of maintenance is far less than we receive in rent. Eventually, I’ll take money out and pay income taxes on it, but that amount will probably always be a small portion of the returns to my share of the business. As long as my wife and I (or our heirs) keep reinvesting most of our profits, the vast majority of it will never be subject to income tax.

Making private basic incomes universal

My wife and I don’t have enough property income to put us in the one percent, and at our age, it probably won’t get there while we’re alive. But we could quit right now and be safely out of poverty with probably as much as the most generous basic income proposals on the table right now.

We have a basic income – a permanently growing basic income – not just for life, but forever. Because we own stuff we don’t need, our society rewards us with more and more stuff every year. We don’t have to do anything to get more every year. Our money works for us, so we don’t have to.

We don’t quit because employers have offered us jobs with good working conditions and pay that makes us significantly better off than living on our basic income alone. Most people in a similar position would do the same. If some people don’t work when a basic income becomes available, we should consider the possibility that employers aren’t paying high enough wages. My wife and I are not better humans than most of the world’s poor. Our lucky breaks make us different from the poor. And those same lucky breaks make us similar to most other people with money.

Just because I benefit from the unfairness of our economic system doesn’t make its rules any fairer. Those rules are not some natural feature of the universe. People made them. People can change them.

Why don’t we?

Obviously people who own stuff have a great deal of political power, but there’s more to it than that. Most people and policymakers do not understand the difference between rewarding people who do stuff and rewarding people who own stuff. Spending rewards production, but rewarding production is not the same as rewarding people who do things that make production happen. Everything humans produce is made from a combination of human effort and resources. Some spending rewards human efforts, but the biggest rewards go to the owners of resources and of the things we’ve made out of them in the past.

People like to think that owners are ‘entrepreneurs’ and ‘job creators’. To some extent this is true. Entrepreneurs are owners who put forth effort to increase the value of what they own, and often what they do is valuable. But there are three reasons entrepreneurship can’t justify the enormous inequalities in the world today.

  1. 1. For owners, work is optional. For everyone else, it’s mandatory. Owners do not have to be entrepreneurs. They don’t even have to be competent. They can hire competent people to manage their money for them. The amount of ‘entrepreneurship’ in my story was miniscule. It amounts to this. I lucked into money. My brother knew what to do with it. I gave it to him. For nothing more than that, I never need to work again. Neither will my successors. And unless they’re spendthrifts or exceedingly incompetent investors, they’ll have more than me, and their successors will have more than them.
  2. 2. Most owners aren’t really entrepreneurs. Economists have a saying, “the entrepreneur tends to become a rentier”. The reason is simple. The more money you make, the more it makes for you, and that part of your income will eventually outstrip the part from the things you actually do. As a rentier, you will eventually stop working, and so, you’ll stop getting money for doing stuff, but your stuff will keep on making money forever.
  3. 3. We can get entrepreneurship without the enormous rewards to ownership we have today. Rewards were smaller a half century ago, but there was just as much entrepreneurship. What can I possibly have done in the seven years that I’ve been accumulating stuff to justify rewarding me and my successors with a perpetually growing stream of work-free income? In short, nothing. I do not exaggerate. I’ve studied the market as an economist and as a political theorist. I’ve lived it as a wage earner and as a business owner. It’s not just me and my wife. It’s how the economy works.

Some people who read this story will probably accuse me of hypocrisy, saying something like, “If you’re an egalitarian, why are you rich?” If I wrote a similar description of the economy when I was poor, they’d accuse me of jealously, saying something like, “if you’re so smart, why aren’t you rich?” That’s the catch-22 for people who complain about the rules of our economic system. You’re either hypocritical or jealous. No one has the right amount of property to complain about the distribution of property.

I plan someday to use most of my money to do something good for others instead of just for myself. But it’s the system that needs to change. Individual owners giving away things at their whim will not fix the unfairness of the system. We need to change the rules.

We don’t need to eliminate the market economy or property rights. We just need to realize that a lot of the income in the world today goes to the people who own resources and the stuff we’ve made out of them. Tax that unearned income and share it with everyone – a universal and unconditional basic income. The most common objection to basic income is that it’s supposedly wrong to give things to people who don’t work for it, when actually, the economy already gives billions of dollars of unearned income to people who are already wealthy. The problem is we don’t share it.

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