In this article, I discuss why steps towards basic income (BI) ‘from within’ the state are institutionally plausible in Denmark, yet this ‘inside-out’ transition is contested in Danish society. I argue that implementation since the 1990s of the flexicurity regime – labour flexibility with social transfers and training – has stretched the developmental tradition that historically has fed the case for broadly inclusive reforms. An ‘Equality Paradox’ is shaped by two relationships, between high social equality and feasibility of basic income, on the one hand, and high social equality and developmentalism, on the other. The upshot is basic income rests on developmentalism indirectly, as state-promotion of economic equality, cooperative public finance, and human development-oriented governing of core institutions all contribute to the feasibility of a BI reform. The ‘Equality Paradox’ explains why rising inequality and precarity in Denmark make a case for basic income within the public sector but the source of this inequality – neo-liberalism – also puts it at risk.