Finland’s Socialist Experiment Goes Off the Rails

Finland’s “free money” experiment has come to a grinding halt.

Kela, the government agency in charge of redistributing benefits, revealed that the “basic income experiment did not increase the employment of participants during the first trial year”

In January 2017, Kela and the Finnish Centre for Economic Research teamed up to carry out a two-year experiment that randomly selected 2,000 unemployed Finns and gave them a monthly basic income of approximately $634. Mind you, these individuals were given the income stipend regardless of whether they were actively seeking employment.

Miska Simanainen, a Kela researcher, informed the BBC that the experiment was conducted in order “to see if it would be a way of reforming the social security system”.

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Simanainen asserts that the trial had not “failed”, and instead claims that it “is not a failure or success – it is a fact, and [gives us] new information that we did not have before this experiment.”

Given the Finnish government’s decision to pull the plug on this project so quickly, Simanainen’s spin on Finland’s Universal Basic Income project should be called into question.

The UBI is all the rage these days in socialist circles, as numerous political figures like Alexandria Ocasio-Cortez have flirted with the idea.

Even entrepreneurial elites such as Facebook CEO Mark Zuckerberg and Tesla CEO Elon Musk have given the UBI a warm endorsement.

Like any socialist program, however, there are hidden costs that come with the UBI.

The Organisation for Economic Co-operation and Development (OECD) estimated that Finland would have to increase its income taxes by 30 percent in order to fully implement its UBI scheme.

Additionally, the OECD cautioned that the UBI could potentially cause Finland’s poverty rate to increase from 11.4 percent to 14.1 percent.

Despite these warnings, cities like Stockton, California, which filed for bankruptcy in 2012, launched a UBI project of its own in 2018.

Feel-good intentions aside, UBI’s are destined to fail because of their redistributionist characteristics.

Increasing worker productivity is at the crux of raising living standards. To do so, capital must be accumulated.

However, the UBI takes resources away from employers, thus stifling capital accumulation. Workers receiving government aid end up living at the expense of other workers who lose out on opportunities to increases their productivity. In the end, these workers get lower wages than they would have in the absence of the UBI.

As a result, society becomes poorer overall.

In all likelihood, the Finnish government came to this conclusion while running their UBI experiment. To be fair, they at least kept this program at a limited scale.

Had the whole country been subject to the UBI, the results would have been disastrous for Finland.

Regardless, we can chalk another loss for socialism.