After role of the governments in economics.

By April 16, 2019 Economics

After the outbreak of the last economic crisis, an increasing number of economists and institutions seem to rediscover the role of the governments in economics. In Italy, the electoral success of the 5-Star Movement has brought the theme of the universal basic income to the center of political debate. Among other measures, the one that the government intends to implement from the following year is the basic income, which, according to them is the measure to combat poverty. It is a significant aid for all households in economic difficulty because it will allow them to receive a financial contribution – money paid at regular time intervals to all those who possess citizenship or who are permanently resident for quite some time. In Europe, this benefit is present, in various forms, in all countries with the exception of Italy and Greece.
Designed to help people in poverty, basic income is not taxable; additionally, the basic income should not be seen as a substitute measure, but to be added to the other forms of social assistance offered by the government. The Italian news agency Adnkronos (2018) shown that for the basic income, it is estimated a cost of 15 billion euros plus 2 billion for the establishment of the employment centers.

On the theoretical level, according to its supporters, the basic income is a tool, which stimulates aggregate demand, growth and employment and consequently the GDP. Technically, a transfer of money to households causes similar expansive effects as a tax reduction. As indicated in the textbook (2012) the aggregate demand represents the sum of spending on consumption and investment by households, businesses and the governments. Therefore, more income for households may induce them to increase their personal consumption because would generate a change in their disposable personal income, producing a further shift of the aggregate demand curve to the right. In my opinion, it is clear this subsidy is focused on stimulating aggregate demand and consumption.
At the same time, an increase in public spending by the same amount produces the same expansive effect. However, this measure also has many critics, sustaining mainly that the number of recipients, however, is destined to explode and with it the public expense, simply because would be perceived as a disincentive to work. Delugan (2018) criticizes the sustainability of the system, arguing that for Italy, to can sustain a basic income that can provide satisfactory support, the tax burden should exceed 50% of the GDP.
Finland experimented on a reduced scale and only for two years the basic income, but as Olli-Nilsson (2018) relates, that experiment has been interrupted. Apparently, the government feared that basic income and the unemployment benefit system were pushing the unemployed not to look for jobs, thus decided to abandon the idea.

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