Distributing cash checks to the public is an effective tool to stimulate the economy, but only in times of crisis.
Photo: Svetlana MAKOVEEVA. Go to Photobank KP
The Thai government launched a bold economic stimulus program on September 25. The essence is that the 45 million inhabitants of this tourist country will receive 14 billion dollars, about 300 dollars per person. In this case, support will be the goal. The money will go to the poorest two-thirds of the population. Why suddenly so much generosity? Maybe this is the distribution of the tourist rental? And our authorities do not want to examine more closely the experience of the Southeast kingdom?
NOT OF A GOOD LIFE
This year there is an invasion of tourists in Thailand. The authorities have introduced a visa-free regime for almost all countries in the world. The hotels are full of people who want to enjoy tropical exoticism. But the distribution of money has nothing to do with this. On the contrary, despite the tourism boom, Thailand’s economy is in trouble. It practically does not grow (less than 2% annually). For this reason, the authorities decided to use the same vaccine as during Covid. That is, inject a little extra money into the economy.
– Distributing cash checks to the population is an effective tool to stimulate the economy, but only in times of crisis. As the experience of such programs in the United States in 2008 and 2020 shows, Americans spent on average between 30 and 40 cents of every dollar received on additional purchases. The remaining 60-70 cents were used to pay off debts or save, says Valery Chernookky, professor at the Russian School of Economics.
Furthermore, the poorer the people were, the more money they sent for current consumption. However, this process has a side effect. Distribution of money is also distribution of money in Asia. This means that their number increases, but the volume of goods and services remains the same. This leads to higher prices. It is true that in Thailand they are not afraid of this. Inflation is already below 1% annually. A slight increase in the economy will only be good.
ETERNAL DISPUTE OF ECONOMISTS
But another side effect will be stronger. The amount of 14 billion dollars is significant for Thailand. This is about 2% of the size of the entire economy. As a result, the country’s budget deficit will approximately double. Basically, Thailand is following the lead of the United States. The new government is increasing the country’s already considerable public debt (more than 60% of GDP), in the hope that in the future the economy will accelerate and it will be possible to pay the bills. But what is allowed in Washington is not allowed in Bangkok.
– This is a rather decisive step. The country will have to increase the budget deficit from 2.3 to 4.3% of GDP in 2025, estimated Anton Sviridenko, executive director of the Stolypin Institute of Growth Economics.
Even Thai economists are still arguing. The government’s decision has already been made, but many criticize it. Including the Central Bank of Thailand.
– The question of the “distribution” of money among the population is an eternal dispute between monetarists and Keynesians. The first advocates strict restrictions on public spending, pointing out the risks of inflation and economic stagnation as the money supply increases. The second, to stimulate internal demand, even saturating buyers with money. They are both right: it simply manifests itself in different ways in different situations,” explains Vadim Kovrigin, deputy director of the Institute of Economics, Management and Law at Moscow State Pedagogical University.
According to him, if the country’s production does not develop due to limited effective demand, then money saturation can boost the development of the economy. If production already fills all capacity, then nothing will happen except inflation. And here we smoothly move from Thai problems to the situation in Russia.
The Thai authorities have introduced a visa-free regime for almost all countries in the world and have no problems with the flow of tourists, but the country’s economy has serious problems.
Photo: GLOBAL LOOK PRESS.
MAYBE WE SHOULD TRY IT?
The idea is, of course, great. Take a bunch of money and distribute it to the population. None of the Russians would refuse to receive such material help. Coronavirus checks (10 thousand rubles per family with children) were a very pleasant help. But now the situation in Russia is different. Can’t compare with Covid or Thailand.
– Our total demand is already significant, production capacities are loaded. With unemployment at a historically low level, the payments would only lead to an acceleration of the already considerable inflation, says Vadim Kovrigin.
Let me remind you that the Central Bank is fighting inflation with a high key rate (up to 19% annually). But it is still not possible to stop the price increase. Budget costs are high. The money supply in the country is growing. But the volume of goods and services does not reach the same level. Both due to internal problems and difficulties with imports.
– The Russian economy is overheated (among other things, this means explosive GDP growth, too high demand and excessive lending – Ed.). In conditions of labor shortage, an additional budget stimulus will not be able to maintain high rates of economic growth for a long time, but will only aggravate the situation with inflation, without a tangible effect in the form of additional growth in production and income. real. says Valery Chernookky.
According to him, aid should be directed to the poorest sections of the population (which is what we are doing, see “KP Aid”), and not distribute money to almost everyone.
At the same time, some experts suggest going even further. Do not limit yourself to giving money, but allocate it only to the purchase of national goods.
– Consumer demand is already being successfully stimulated in Russia. The root of the problem is what goods you are satisfied with. In Russia, it would be useful to support the most disadvantaged segments of the population (and mainly young families) with specific certificates for the purchase of Russian goods and products, says Oleg Nikolaev, businessman, member of Business Russia.
HELP “KP”
10 million families receive support every month
Our country moved to specific support several years ago. This was a great social reform. The authorities then abolished the penny child benefits, which were granted to everyone, regardless of income or level of wealth. And they continued to support those who earn below average and don’t own much property.
Just one example: around 10.2 million children currently receive a single benefit. That is, approximately one in three children in the country is covered by this social support. The amount of benefits received by parents ranges from 50% to 100% of the regional subsistence minimum for children (depending on the financial situation of the family). According to the Ministry of Labor, the average monthly benefit in the country is 15 thousand rubles. That’s about $165 a month or almost $2k a year. And not just once, but up to and including the age of 17. In general, Thai people still have time to learn and learn from us.
BY THE WAY
What about unconditional basic income?
There was a time when some economists were passionate about the idea of an unconditional basic income. It was such a utopian idea. They say that every person, whether they work or not, should be given a little money. As they say, to keep your pants up. So that basic needs are covered. So, according to scientists, it would be possible to work not for money, but for pleasure. Do what you want. And then all people will be happy and the economy will begin to develop at an accelerated pace. After all, when you do what you love, everything turns out better and faster. And routine operations can be performed by robots.
True, none of the experiments (and they were carried out in many countries) completely confirmed the hypothesis. Some people left low-paid jobs, others changed careers, started studying, took care of their health, were able to move to a larger apartment and indulge in leisure and shopping. Overall, life has improved, life has become more fun. It’s always like that with money. But none of the researchers discovered a direct connection to economic development. Or because the sample is usually small, from several dozen to several thousand people. Or because the duration of the experiment was too short: no more than one or two years. However, these ideas still float around. Even among Russian economists.
“On a 10-20 year horizon, this is a very promising direction, since robots will replace human labor and not all employees will be able to find new jobs,” says Anton Sviridenko.
– The idea of an unconditional basic income remains just a populist slogan in Russia. Support measures must be strictly targeted, says Vadim Kovrigin.
– I, as an employer, cannot treat this idea as anything more than a toy of the mind. At least in today’s Russia, with a terrible labor shortage, there is no point in thinking about it. When we reach at least the world average level in terms of the number of industrial robots per thousand people and people stop waiting on the assembly line, then we will think about it, says Oleg Nikolaev.
