Income Guarantee Schemes
Amir Hasanat
ECON 3505 - Critique of Capitalism

Abstract
Canada and the United States grapple with situations that necessitate income guarantee schemes but have not implemented the schemes. Income guarantee schemes are social welfare provisions in which governments offer incomes to the citizens to enable them meet their needs as long as they meet established conditions. The origin of this scheme lies in the understanding that every citizen has a right to wealth and property of the state. It is also based on the reality that not all citizens are capable of earning income or sustaining themselves. Income guarantee schemes are based on social welfare models, which conceptualize that it is the role of the government to cater for the needs of the citizenry. Therefore, income guarantee schemes undermine the ideals of capitalism that call for individual efforts for purposes of meeting needs. Income guarantee schemes have a long history of evolution, implementation, and success.

Introduction The United States has a number of anti-poverty programs that guarantee economic support to the vulnerable in society (Economist, 2013, p. 1). Income guarantee schemes can be of great relief to a number of poverty stricken people in the country. In Canada, a four-year experiment with income generation schemes was successful but due to economic period of the time, the schemes were discontinued (Belik, 2011, p. 1). Though they intend to end poverty and provide economic equality, income guarantee schemes are counterproductive because they make it less desirable for people to be productive. Income guarantee schemes denote the role of government in providing free income to its citizens based on pre-arranged stipulations. These schemes have a long history and different states and governments have applied them differently. One stark quality of the income guarantee schemes is the social welfare pillar that underscores the essence of such practice. In developed countries, income guarantee schemes target the poor in the society with the aim of uplifting their economic status and eradicating poverty. In addition, income guarantee schemes endeavor to achieve economic equality by ensuring that even those who are unemployed earn some income. Therefore, through guarantee income, the government reduces or eradicates the dependency ratio, thus spurring economic activity. The economic security guaranteed by income guarantee schemes is very important for the sake of social order and economic equality. Since every citizen has the same rights, it is necessary to ensure that the needs of all are catered for. Economic disparity is a common problem in many countries, and the governments implement numerous programs with the aim of tackling it ( McGregor and McKillop, 2003: 20). Income guarantee programs offer the best blueprint towards ensuring that the disparity in economic sense is bridged. This serves an economic, social, and political purpose, because once every citizen is assured of some kind of income, there can be overall development, reduced crime, as well as satisfaction across the political divide. The history of income guarantee programs can be traced from Caliph Abu Bakr who offered free income to citizens, American revolutionary Thomas Paine who championed for citizen dividend, Emperor Napoleon Bonaparte who affirmed every citizen’s right to enjoy the produce of the earth, and Robert Theobald who called for guaranteed minimum income in 1963 through his publication (OECD, 2013: 35). Income guarantee schemes are dangerous to economic development in the sense that they encourage complacency and dependency on the state. Citizens who get the free income often fail to work hard, thus becoming an economic burden to the state. It may seem like a way of helping the poor but social welfare provisions often lead to more stagnancy and underdevelopment of the economy. Citizens should be trained to work hard for their personal and economic development, which eventually translates into national economic development. By giving free income, the state is simply encouraging laziness among citizens, which will directly lead to economic failure. When people become increasingly dependent on government support, they fail to work towards better living.
Income guarantee schemes in developed countries Income guarantee schemes denote a system of social welfare provision that assures that all people have an income adequate to live on, as long as they meet specified conditions ( McGregor and McKillop, 2003: 23). Eligibility is characteristically determined by a means test, citizenship, and either a readiness to execute community services or accessibility for the labor market. The primary aim of income guarantee scheme is to decrease poverty. In cases where citizenship is the lone requirement, the scheme turns into a general basic income. Income guarantee schemes entail numerous elements such as a determination of the social minimum, particularly less than the minimum wage, a social safety net, child support, state pension, student loan, and disability pension. Basic income implies the provision of matching compensations from a government to every citizen. Guaranteed minimum income (GMI) refers to a system of payments by a government to nationals who do not meet one or additional means tests. Whereas most modern states have some type of GMI, a basic income is unusual (Lawn, 2009: 14).
Activists
Initially, Muslim Caliph Abu Bakr started a GMI program, giving each man, woman, along with a child ten dirhams once a year (Medialternatives, 2014: 1). This was afterwards increased to twenty dirhams. In 1795, Thomas Paine, an American revolutionary, championed a Citizen's Dividend to every U.S. citizen as an imbursement for "loss of their natural heritage, by the launching of the scheme of property-owning. Napoleon Bonaparte affirmed Paine's sentiments by commenting that every person is at liberty by birthright to enjoy the products of the earth to live a decent life” ( McGregor and McKillop, 2003: 23). In 1963, Robert Theobald issued the book titled Free Men and Free Markets, in which he championed for a guaranteed minimum income. This marked the beginning of the phrase ‘guaranteed minimum income’ (Lawn, 2009, 14). In 1966, the Cloward–Piven approach advocated for "overfilling" the US welfare structure to compel its crumble in the anticipation that it would be reinstated by "a guaranteed yearly income and consequently an end to paucity" ( McGregor and McKillop, 2003: 24). In his last book, where do we go from Here: Chaos or Community, in 1967, Martin Luther King Jr. stated his persuasion that the solution to poverty lies in guaranteed income (International Labour Office, 2011: 22)? Tax returns would finance the majority of whichever general minimum income (GMI) proposal. In most cases, GMI proposals endeavor to create an income floor near to or above paucity lines amongst all citizens, the fiscal weight would require evenly broad tax sources, like income taxes or VATs, to fund expenditures of the kind. To varying scales, a GMI may be funded via the reduction or removal of other social security initiatives such as unemployment insurance. Though dispassionate with regard to government finance, Milton Friedman as well projected a GMI in the milieu of eliminating minimum wages, which he stated unduly disfigured labor market economics. The level to which a GMI is considered to reduce or enhance existing social security initiatives can be seen like one of the unsettled cleavages amid GMI activists. More economically, GMI conformists seek to replace the mass of welfare expenditure with a GMI whilst more social or democratic proponents perceive the GMI as a constituent of a broader social benefit system (Zaman, 2012: 65).
Minimum income examples around the world
Cyprus
In July 2013, the government of Cyprus unveiled a program to change the welfare scheme in Cyprus and create a GMI for every citizen. However, this has been disputed.
France
In 1988, France was among the first nations to put into practice a minimum income, referred to as the Revenu minimum d'insertion. This was turned into Revenu de solidarité active (RSA) in 2009, a novel system that aimed at dealing with the poverty trap by offering low-wage employees a harmonizing income, thus supporting activity (James and Kwong, 2009: 32).
Islamic socialism Islamic socialism refers to the assertion by Islamic leaders to establish a spiritual form of socialism (Islamic Socialism, 2004: 1). Islamic socialists suppose that the doctrines of the Qur’an along with Prophet Muhammad (pbuh), particularly zakat are attuned with the principles of social and economic equality. Abu Dharr al-Ghifari, a friend of Prophet Muhammad (pbuh), is recognized as a major precursor of Islamic socialism. He complained against the amassing of wealth by the elite during ‘Othman’s caliphate and urged the people to support evenhanded redistribution of possessions. The initial Muslim Caliph Abu Bakr initiated a guaranteed minimum average of income, offering each man, woman, along with child ten dirhams yearly. This was afterwards amplified to twenty dirhams. The first untried Islamic community was recognized in the course of the Russian Revolution of 1917 as an element of the Wäisi movement, an untimely follower of the Soviet government (Zaman, 2012: 65). The Muslim Socialist Committee of Kazan was as well active during this time.
In the contemporary era, Islamic socialism can be separated into two, a rightist, and a leftist form (Paracha, 2014: 1). The leftist championed wing urged the Muslims to support the Marxist and Socialist movements in the world. The rightist socialists urged the Muslims to support social justice, democratic society, general equity, Islamic principles, and Islamic law. They as well reject a full espousal of a class effort and keep a detachment from other collectivist movements. Revolutionary activity beside the Soviet Union's southern boundary, Soviet leaders recognized and would illustrate the concentration of capitalist powers as well as invite them to arbitrate. It was this perceptive, which provoked the Russian representation at the Baku Congress to decline the disputes of the national communists as unfeasible and counterproductive to the uprising in general during September 1920, without detailing their fear that the security of Russia position in the balance (Paracha, 2014: 1). It was this understanding, in addition to the Russian Bolsheviks' annoyance at seeing a different revolutionary center projected in their own field revolutionary, which stimulated them into fear against the national communists.
Zakat
Zakat is the practice of generous giving founded on accrued wealth and is among the Five Pillars of Islam. It is compulsory for all financially capable Muslim adults regarded to be an act of goodness in which one expresses concern for the happiness of fellow Muslims, along with preserving social accord between the prosperous and the poor. Zakat encourages a more evenhanded redistribution of wealth as well as fosters solidarity in the midst of members of the Ummah. Zakat is destined to discourage the amassing of capital and arouse investment. For the reason that the individual is obliged to pay zakat on the net possessions, rich Muslims are obliged to invest in lucrative ventures, or else see their wealth gradually erode. Moreover, means of production like equipment, tools, and factories are excused from zakat, which additionally provides the enticement to invest possessions in productive businesses. Individual assets like clothing, residence, and household furniture are not deemed zakatable assets. In accordance with the Quran, there are eight types of people (asnaf) who are eligible to take delivery of zakat funds: the poor, the restrained, the zakat collectors, people from other religions sympathetic to Islam, those being freed from bondage, those with debts, people working according to God’s way and street children (Zaman, 2012: 11).
Welfare State The perceptions of welfare and retirement fund were launched in early Islamic law as types of Zakat (charity), which is one of the key doctrines of Islam (Zaman, 2012: 11). The principle has been maintained in both traditional and current forms of Islam. The levies collected by Islamic governments were used to help the needy people in the society such as the widows, children, and the disabled. Al-Ghazali (Algazel, 1058–1111), an Islamic jurist affirmed that the government was as well expected to accumulate food supplies in each region in case a catastrophe or famine transpired. The Caliphate can therefore be deemed the world's initial major welfare state (Barr, 2012: 41). In the course of the Rashidun Caliphate, Caliph Umar initiated various welfare initiatives. Equality was enlarged to all citizens because Umar alleged that no one, regardless of how imperative, should live in a manner that would discriminate him from other people (Zaman, 2012: 11). Umar himself lived an uncomplicated life and disconnected himself from any of the material lavishness. Limitations on possessions were as well set for governors along with officials, who would repeatedly be sacked if they manifested any outward symbols of pride or possessions that might differentiate them from the people. Umar's pioneering welfare reforms throughout the Rashidun Caliphate incorporated the beginning of social security. This entailed unemployment insurance that did not materialize in the Western world pending the 19th century. In the Rashidun Caliphate, every time citizens were hurt or lost their capability to work, they turned to the state to request that their minimum necessities be met. With the jobless and their families getting an allowance from the government treasury, retirement pensions were offered to elderly people, who had retired and could depend on receiving a pay from the government treasury. Abandoned children were also catered for with one hundred dirhams used up annually on every orphan’s development. Umar as well introduced the notion of public trusteeship plus public tenure when he put into practice the Waqf, or benevolent trust, scheme, which relocated wealth from the personal or the little to a social combined ownership, in order to offer services to the public at large. For instance, Umar purchased land from the Banu Harithah and transformed it into a benevolent trust, which implied that profit and goods from the land benefitted the poor, travelers, and slaves (Zaman, 2012: 44). During the large famine of 18 AH Umar launched further reforms, like the beginning of food rationing by means of coupons, that were offered to those in want and could be replaced for wheat along with flour. Another pioneering concept that was launched was that of a scarcity threshold, with endeavors made to guarantee a lowest standard of living, making it clear that no citizen would be allowed to remain hungry. To establish the poverty line, Umar ordered a trial to test the number of seers of flour that would be necessary to feed an individual for a month. He established that 25 seers of flour was sufficient to feed 30 people, therefore concluded that 50 seers of flour were enough to feed an individual for a month (Thurston and Rangachari, 2012: 6). Accordingly, he ordered that each needy person be given a food portion of fifty seers of flour for each month. As well, the disabled and poor were assured of cash stipends. Nevertheless, in order to shun some citizens from taking advantage of government services, begging along with laziness was not accepted, and people who acknowledged government gains were expected to be causative members in the public (Zaman, 2012: 76).

Social welfare schemes- hazardous to economic growth Social welfare schemes, which underscore the practice of income guarantee schemes, are harmful to economic growth. Though the government ought to play a role in supporting the citizens economically, the most effective way of guaranteeing individual and national development is economic growth yet economic growth cannot be founded on welfare schemes ( Harrington, Marshall and Hans-Peter, 2012: 672). Income guarantee schemes kill the ability to work hard and acquire economic growth, which affects the nation at large. There are certain sections of the society that requires assistance from the government, but this help should be geared towards building capacity for self-reliance. The poor, disabled, and children should be given economic stimulus to prevent them from going deeper into poverty as well as ensuring that they indulge in some form of economic activity. Although income guarantee programs seek to end poverty, their sustainability is a burden to the government, which ought to invest in creating an acceptable environment for economic development. Moreover, insisting on income guarantee schemes only leads to more poverty, because of the aspect of dependency. Income guarantee schemes cultivate a culture of dependence on the government that often leads to laziness and complacency. The citizens targeted by income guarantee schemes normally see no need for working hard, because they are satisfied with the money they get from government. As such, the government reduces economic development by focusing on the welfare of the people as well a failing to motivate citizens to work hard.
How the IGS Has Impacted the Economy as a Whole Income generation schemes (IGS) has never been launched in the United States and its application in the economy along with its impact is only a matter of debate (Economist, 2013, p. 1). There exist great interest in the subject particularly the perceived effects of income generation schemes in the economy with regard to GDP, HDI, unemployment and standard of living. However, the country has never had an opportunity to test the impact of income generation schemes on the above parameters. There has been discussion on the perceived impact of IGS with some analysts claiming that it will kill the spirit of entrepreneurship and lead to dependency. It has also been cited that IGS would lead to more unemployment because most people will not have the desire or motivation to work. This will directly result in the low standards of living. On the contrary, income generation schemes are described as viable poverty eradication methods that will lead to better living due to the economic equality aspect (Economist, 2013, p. 1). A four-year experiment with income guarantee schemes resulted in numerous positive results though the system was halted for economic reasons. On a trial basis, the Canadian government launched a guaranteed minimum income for poor families in Dauphin, Manitoba (Belik, 2011, p. 1). Though the data had been hidden, it later emerged that the program entailed 1000 poor families receiving stipend from both the provincial and federal governments to meet their needs. The analysis of the guaranteed minimum income in Canada it became apparent that it was successful on many fronts though it was discontinued. First there were no cases of people leaving employment, in fact, more people worked as they received the stipend. In addition, more teenagers completed school indicating that the free money did not affect their performance. In overall, the quality of life was much better and the guaranteed minimum income scheme trial in Canada was successful (Belik, 2011, p. 1).
Conclusion
In summary, income guarantee schemes denote the system in which governments offer monthly income to its citizens as long as they meet specific conditions. This is based on social welfare in which the government establishes measures to offer income to those who are unable to afford survival through their own means. This paper has discussed the subject of income generation schemes in details to offer a deeper understanding of the practice, history, and status of the same. At the center of the discussion was whether income guarantee schemes are helpful or harmful. Income generation schemes have been implemented since the days of yore, in the sense that they have been around for a very long time. Its history can be found both in the works of great thinkers as well as application in various countries like France, Cyprus, and Spain among others. Islamic socialization along with the model of welfare state occupies a central position in the understanding and practice of income guarantee schemes. The paper concludes that though they serve the purpose of social welfare by supporting the vulnerable in society, income guarantee schemes are counterproductive and thus harmful to the society. Income guarantee schemes make it less desirable for citizens to be productive, thus reducing their ability to play part in economic growth development. This is based on the argument that since they receive free income, there is no need to work hard. In addition, income guarantee schemes are a huge financial burden to the government, because they put a strain on the national budget. Economic welfare that informs the practice of income guarantee schemes utilizes money that could have been used for development processes, yet development is more effective than income guarantee schemes.

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