UBI as a rescue for Ukraine–surprising idea which increase the importance of the current EU citizens’ initiative
UBI as a rescue for Ukraine–surprising idea which increase the importance of the current EU citizens’ initiative

The idea is briefly as follows. Ukraine needs international help to recover from the wounds of war anyway, but in this case, the concept of an Unconditional Basic Income could be used. That would not only help Ukrainian people to survive the war and the damages of the national economy but also be the first ever country-wide and also first ever internationally organized UBI pilot. And maybe first ever such pilot that will be financed partially from the frozen assets of the perpetrator of war, as suggested by two prominent authors from USA and Ukraine.

The perspective also increases the importance of the European Citizens' Initiative "Start Unconditional Basic Incomes (UBI) throughout the EU" (https://sign.eci-ubi.eu) as Ukraine has recently expressed its willingness to enter the European Union. Although the introduction of such reforms of social policies is not EU competence, Brussels still can work out some kind of "general framework" and give a start to the process this way. Such a framework may be needed for many reasons as the national UBIs will not be introduced at once and - who knows - maybe we will welcome Ukraine as a new member state where UBI is already introduced.

Correct me but I believe that there should be no "competence problems" for the EU in carrying out a pilot project within an international help program.

Regarding the financement, there is one prominent and very surprising idea.

On 2 March, Simon Johnson, former Chief Economist of the International Monetary Fund, and Oleg Ustenko, Economic Adviser to the President of Ukraine, suggested in their common article on the Politico website that the United States and its allies should set up a new global fund to ensure the stable economic survival of Ukrainian citizens, both at home and abroad, in the face of growing refugee flows and increasing pressure on the budgets of affected countries.

"The generosity of the countries of the European Union and their citizens has been amazing, and people around the world are sending donations. Granting the right to an extended stay in the European Union is also helpful, ”write Johnson and Ustenko. "But if the invasion continues, it will mean a long-term struggle for human survival that must be properly and sustainably funded."

According to Johnson and Ustenko, Ukraine has good technical conditions for state remittances to all citizens, and most of them have easy access to their money online, regardless of whether they live in a war zone or not - and therefore this country could be considered being ready for paying UBI for each citizen.

And, as the authors point out, fortunately, a source of funding is also readily available: Russia's public and private assets worth hundreds of billions of dollars, which are currently frozen but can be turned into usable resources. The future of these assets is currently uncertain, but the authors estimate the potential of this source of funding at the order of $ 300 billion. The reserves of the Central Bank of Russia alone are estimated to total about $ 630 billion, more than half of which has been frozen due to sanctions. The assets of President Putin's relatives and oligarchs will be added.

The fund would be set up by the US, the EU, the UK and other potential counterparties with an initial value of $ 200 billion (nearly € 182 billion), with the merging parties buying bonds from the fund. If we start paying money only to Ukrainians who have fled their homeland, it would continue for three to four years, assuming that each person is paid in the order of $ 50 a day (about 45.50 euros). If it covered all Ukrainians, the fund would, of course, have to be much larger. Well, $ 18,250 per person and $ 821.25 billion per country per year…

Sorry if I am wrong, but in particular conditions, the costs may actually be lower than initially thought.

Converting into euros, we would get 1384 euros per month for every citizen of Ukraine. Considering the war situation, it seems not very fair to call it too generous. However, as the authors confirm, these are initial figures to be considered. Since one of the authors is an American, it seems that maybe it is based on the standards and price level of his homeland - who knows, maybe just because by this way, each American can better understand the planned amount of material help for Ukrainians.

Undoubtedly, taking into account the cost of living in Ukraine and its refugees' host countries would make more sense. In terms of purchasing power, this 1384 euros in the US is equivalent to 365 euros in Ukraine, which is still significantly higher than their minimum wage (currently 6000 hryvnia, or 187.38 euros).

Couple of years ago, we have suggested with Estonian activists that in our country, regardless of the citizen's age, the UBI should be at least equal to the average standard expenditure per child per month, which is currently about 400 euros (for example, a family of two adults and three children would then receive a total of 2000 euros per month, plus salary and other income). In terms of living cost, the equivalent in Ukraine would be about 156 euros a month. As we don't know standard costs per child in Ukraine, we can only assume that they are "in proportion" to the overall price level.

The living cost in Slovakia is the highest among the usual destination countries of Ukrainian refugees, and Estonian one is almost equal to it. So there could be an option that while every Ukrainian refugee (including a child) hosted by Western countries, Scandinavia and Finland, get "Western amount" (1384 eur), those hosted by neighbour countries or Baltic states will be paid 400 euros (437 dollars) a month, and those who have remained in the country 156 euros (171 dollars) a month, regardless of age and income. No doubt that this approach will ensure a longer lifetime to the fund.

Johnson and Ustenko do not use the keyword "pilot project" in their article, but there is no doubt that if their proposal is initially implemented in the form of a pilot, the benefits will be universal. It would make most sense if the UBI model has been applied during the pilot like it should be in real life. First of all, it needs to be clarified, in cooperation with the Ukrainian authorities, which traditional social benefits should be waived due to their redundancy and which amount of income tax or possible additional solidarity tax might be able to cover the expenses for UBI.

The fund proposed by the authors in this case has a somewhat different role than simply paying people money. The fund is then primarily a tool to start the pilot and ensure its smooth running. People get money, but it comes back from taxes to the fund. If not enough, there are two options, depending on the situation: either to adjust the income tax / additional solidarity tax rate to the extent necessary, or to state that relying solely on taxes would make tax rates unreasonably high.

In that case, the actual contribution to the fund shall be the amount of the tax loss. In addition, of course, the money paid to Ukrainian war refugees to survive abroad. It is uncertain for me whether this too needs to be covered by taxes, but it is necessary to avoid putting pressure on the host country's social security systems and to encourage refugees to refuse abusive "job offers" to which they are more vulnerable. There is at least one scandalous case known through the Estonian media where a sex business operating in Germany (owned by an allegedly Russian-speaking woman from Estonia) organized a recruitment campaign among Ukrainian war refugees.

Anyway, the "3/2 initiative" by Johnson and Ustenko should be welcomed. The implementation of it will "hit several flies in one fell swoop". The economy, damaged by war, is helped to stand on its own two feet via individuals, which is the logic of a UBI. Ensuring that people "stay afloat" in turn provides a stable income base for the business sector, which provides essential products and services. At the same time, if the whole process is also being monitored and corrected if needed, we will gain experience of a global importance.

P.S. For my part, I apologize for not being an economic expert, but I hope you will agree with one legendary Estonian broadcaster Valdo Pant (1928-1976) who allegedly said once: "You don't have to be a chef to talk about food."