Can cash solve poverty? Stephanie Keith/Getty Images

April 26, 2023   8 mins
April 26, 2023   8 mins

On December 10, 2020, Twitter CEO Jack Dorsey announced a $15 million donation for a policy pilot across several American cities. About seven months earlier, America’s economy had cratered amid the Covid pandemic, leaving behind a workforce desperate for funds. Until then, public responses to the crisis had been haphazard at best — stuck in Congressional gridlock, a meagre $1,200 relief package had only recently found its way into Americans’ bank accounts. In response, GiveDirectly, the philanthropic start-up that had sent millions to the African poor throughout the 2010s with funding from Dorsey, began to expand its activity in the United States. “What people need now, more than ever,” the organisation declared, “is cash.”

The announcement spoke to a general mood. After a 20-year detour in the Third World in the Nineties and 2000s, travelling from South Africa to India to Mexico to Kenya, cash transfers had made a spectacular comeback to the United States. The uptake of the proposal in the 2010s was impressively ecumenical: even a notoriously conservative World Economic Forum came round to the idea of grants. By 2021, with Biden’s rescue package, cash transfers such as family allowance were joined by large-scale plans for an infrastructure stimulus, expanded unemployment benefits, and school funding. Through the backdoor, support for universal basic income (UBI) was back in vogue, from Rio’s favelas to think thanks in California’s Palo Alto.

In the American tech sector, Dorsey and Hughes were far from alone in their enthusiasm. Over the preceding decade, financiers and entrepreneurs from across the industry — including Elon Musk, Richard Branson, Jeff Bezos, and Mark Zuckerberg — had steadily come out in favour of UBI and cash transfers as the solution to social ills.

California served as the proposal’s natural home. With its legacy of frontier boosterism and settler colonialism, the state was known for its populist activity in the late 19th century and its early adoption of antitrust laws. It also counted some of the first experiments in direct democracy, with Progressive reformers introducing provisions for referenda in the early 1900s. By the Nineties, a tech literature storming out from the Bay Area reworked the modernist themes of Left-wing radicals and hippy modernists that came before, from magazines such as Wired and Forbes, to an early blog culture for effective altruism.

Libertarian social scientist Charles Murray also provided sideways inspiration for the tech romance with UBI. Murray drew on the anti-poverty strategies first devised by American welfare reformer and Senator Daniel Patrick Moynihan in the late Sixties, when concerns about the black family drove America’s experiments with cash allowances. For Murray, the extension of President Richard Nixon’s tax credits in the Seventies and Eighties offered a useful precedent for a wholesale transformation of the American welfare state. Its set-up would be simplified by tying benefits to stock options and handing out all benefits in money. “Since the American government [was going to] continue to spend a huge amount of money on income transfers,” Murray claimed, it would be preferable to “take all of that money and give it back to the American people in cash grants.”

Murray did tie strong conditions to his grant, hoping to rekindle a desiccated civic landscape: receipt of the grant would be conditional on membership of a voluntary body, which would pay out the grants and impose standards of behaviour on recipients. Coupled with a broader programme of tax cuts, Murray’s transfer state could solve both labour market rigidity and remedy the crisis of the American breadwinner — black and white. In the 2010s, his proposal gained headway across the American tech sector, from the Cato Institute to a new Basic Income Lab in Stanford.

By the early 2010s, however, Murray’s concerns about familial stability were also proving less important to the new American basic income scene. After the dotcom crash of 2001, companies such as Google, Facebook and Twitter emerged as the vanguard of a newly “social” internet. When, for instance, Facebook co-founder Chris Hughes retired from his company in 2007, it took him only a few years to embrace a deceptively simple yet also radical idea: giving cash directly to the poor. By August 2012, Hughes had joined the board of GiveDirectly an organisation promoting direct cash transfers to tackle poverty worldwide.

As Hughes saw, the new platform economy could no longer presuppose the stable unit of the male breadwinner model. The automation apocalypse had also failed to materialise and, rather than be displaced by robots, labour in the American service economy became ever more supervised and mediated by digital platforms, barely increasing productivity. This new economy was not one of pointless drudgery, however. Just like labour, social interaction had become more informal and fleeting in the post-industrial era. In contrast to traditional media, civic organisations and social media allowed for a more open and non-hierarchical engagement between citizens. Cash welfare was a natural complement to this openness.

For Hughes, American history also offered ample alternatives for “over-engineering” approaches to welfare. “The United States already runs the biggest cash transfer programme in the world,” Hughes noted in his autobiography Fair Shot, “giving tens of billions of dollars, no strings attached, to struggling poor families to help boost their incomes and stabilise their financial lives.” Citing Nixon as a precedent, Hughes drew a straight line from the Sixties to the 2010s: just like Facebook, Twitter and Reddit, Nixon’s Earned Income Tax Credit scheme relied on the idea that state-driven public services were inferior to putting money in the hands of wage earners. Online and offline, individuals could now determine their own needs and preferences. By 2016, the start-up incubator Y Combinator, which funds companies such as AirBnb, Dropbox and Twitch, decided to launch its own basic income pilot in Oakland. While its first programme was quite modest and involved less than 10 individuals receiving $1,500 a month, the experiment would soon be expanded in 2018 and then in 2020, after the pandemic took in substantial funding from tech hubs. Today, former Reddit CEO Sam Altman still hopes to use Y Combinator’s resources to stave off his (supposedly self-created) job apocalypse through machine learning. In 2021, Altman’s OpenAI gave away one third of its resources to UBI Charitable, a non-profit which was to fund further pilots across the states.

Its economic drivers were evident. In a society with fewer permanent jobs, more precarious work and higher rates of self-employment, a corporatist welfare state built on trade unions and insurance funds seemed more and more obsolete. Instead, direct cash payments could furnish security for the new platform “precariat”, no longer embedded in the political parties, development coalitions or family units presupposed by an older welfarist tradition.

These shifts epitomised a unique “techno-populist” front for basic income. In her memoir of the 2016 presidential contest What Happened, for instance, Hillary Clinton recounted how the proposal of a universal basic income “fascinated” her, looking forward to an “Alaska for America” plan. Inspired by the self-described “entrepreneur” Peter Barnes, whose bestseller With Liberty and Dividends For All argued for a “everyone-gets-a-share capitalism”, Clinton almost included the proposal in her bid to the presidency. In the same period, the “anti-party” parties of the Five Star Movement, Pirate movements or Spain’s Podemos pioneered a populist retake of the proposal, while financial analyst Jim O’Neill pleaded for a “QE for the people” — a curious alliance between populists and technocrats.

The resulting hybrid has sometimes been dubbed “technopopulist”. More than just a vision of representation, technopopulism also began to cohere around a distinct vision of social policy in the 2010s. The enthusiasm for a “transfer state” exhibited a curious blend of “populism” and “technocracy”, fusing a focus on digital solutions with an aversion to narrow interest bargaining. As Chris Bickerton and Carlo Invernizzi noted, technocrats and populists overlapped in their opposition to the transactional politics of the post-war period, leaving intermediary bodies out of government and exhibiting a more abstract view of human needs.

This also tied in with a changing political culture. With the weakening of representative mechanisms, society seemed increasingly unable to articulate concrete needs and thereby had to consider its welfare requirements in the abstract. The New Left had first proposed uncoupling work from income in the inflationary Seventies, using it as a wedge to move a stagnant capitalism beyond the antiquated work ethic. Inspired by the anti-authoritarian potential of cybernetics, they began not just to think of basic income as a tool to deconstruct social policy, but to rethink socialism beyond the worker and the social itself. In the late Nineties, the Left-wing radical Antonio Negri declared that “flexibility and mobility of [the] labor force . . . were irreversible”.

Yet the New Left could hardly anticipate the “disintermediated” environment in which their cash transfers would come to truly thrive. As citizens left the lively post-war network of institutions — unions, parties, and other civil society associations — which had translated local needs into concrete, collective demands which the state could then attempt to meet, statesmen increasingly turned to public relations experts to win office. The link between politicians and the public also shifted: instead of attending to an organised civil society, they began to project “opinions” onto an atomised public. This revolution also implied a drastically different view of human needs. Rather than being constituted through a democratic process and transactional politics, needs could now simply be revealed as consumer choices on a market or in our new virtual ecosystems. In the Zuckerberg welfare state, citizens would be able to receive monetary “dividends” directly on their phones via ApplePay, Twitter or Facebook.

The increasing popularity of Alaska’s dividend model remains one of the best illustrations of this shifting conception of welfare — from a concrete notion of poverty as a lack of access to socially constituted needs (housing, unemployment, education, health care) to an abstract definition of poverty as a lack of money. The Alaska Permanent Fund (APF) itself was created in 1976 as an amendment to the state constitution. The initial impulse was for the state to invest a share of the revenue into an alternative source of revenue for when the state’s oil fields would be depleted. Under this framework, it seemed clear that the state had to use the money in strategic sectors to prepare an energetic transition. While this strategy never really materialised, by 1982, the Permanent Fund Dividend (PFD) was created and what was meant as a state fund became a source of individual dividends. Rather than a source of income for the state and government programmes, the fund became a cash transfer programme for the direct benefit of the residents. This shift put the state in an increasingly difficult budgetary situation, as Alaska has no income or sales tax. In September 1999, the state submitted an advisory question to decide whether it could use a portion of the Alaska Permanent Fund to fund government programmes. In a significant vote, the proposal was rejected with 83.25% for No.

This rejection of public goods in favour of direct transfers would become increasingly salient in the following decades. When, in July 2019, the governor of Alaska announced drastic cutbacks at the state’s public university system, he thus implicitly chose between two visions of social policy. As part of a general austerity drive, half of expenditure was to be scrapped, buildings sold off, and staff members fired. The justifications for the cuts were specific: Alaska wanted to maintain its citizen dividend and could not do so in a falling oil market. Alaskan conservatives defended their grant with a variant of Hughes’s argument: Who needed a public university if every book had become available on Amazon?

Behind the rise of UBI thus stood a deeper shift in modern political culture. More than a system of economic organisation, “markets” have become an indispensable anthropological tool for thinkers on the Left and Right. As the French philosopher Marcel Gauchet noted in 1998, the late-century revival of the idea of “the market” had “very little to do… with considerations of economic efficiency”. Rather, it followed “a reconsideration of the political status of the actor” itself. As a policy, then, UBI presupposed a new anthropology: no longer that of the “animal laborans” into a community of citizens, but that of the “sovereign consumer” inscribed into a network of users. This new model of “market sovereignty”, as British historian Eric Hobsbawm noticed in 2001, appeared to offer “an alternative to any kind of politics” as such. And as Hobsbawm indicated to an Italian journalist two years before: “If consumers are able to achieve their aims by exercising their power of choice every day through the purchase of goods or the indication of their opinions to the mechanisms of media consultation, what exactly remains of citizenship? Is there still any need to mobilize groups of people for political objectives?”

As Gauchet and Hobsbawm insisted, the success story of cash transfer will never be the exclusive province of policy makers, economists, politicians, social scientists, or activists. Instead, it hints at a more profound break at the heart of modern political culture: the occurrence of a “second capitalist revolution” somewhere in the second half of the 20th century. After “the end of labour, the end of production, and the end of political economy”, as Jean Baudrillard saw it in the late Nineties, money had now “found its proper place… an orbit which rises and sets like some artificial sun”.

On Left and Right, the growing enthusiasm for cash transfers in the last 10 years signals not just a crisis of the old welfare state, but a crisis of politics as a type of human activity. Even in the tumultuous 2020s, it remains an open question how and when it will end.

Anton Jäger is a postdoctoral researcher at the Catholic University of Leuven in Belgium. He is the co-author of Welfare for Markets: A Global History of Basic Income.