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Money for Everyone and for Free: What Will Happen if We Pay Benefits to Every Russian to Support the Economy
On September 25, the Thai government launched a bold economic stimulus program. The gist is that 45 million residents of the resort country will receive about $300 per person. In this case, the support is legitimate. The money will reach the poorest two-thirds of the population. Why such generosity? Maybe this is the distribution of tourist rent? And do our authorities want to take a closer look at the experience of the Southeastern Kingdom?
This year, Thailand has seen a tourist invasion. The authorities have introduced a visa-free regime for almost all countries in the world. The hotel is full of people wanting to enjoy the exotic atmosphere of the tropics. But the distribution of money has nothing to do with it. Rather, despite the tourist boom, the Thai economy is suffering. It is not growing much (less than 2% per year). Therefore, the authorities have decided to use the same vaccine as during the Covid period. This means investing more money in the economy.
- Giving citizens cash checks is an effective tool for stimulating the economy, but only during a crisis. Our experience with these programs in the United States in 2008 and 2020 showed that Americans spent, on average, 30 to 40 cents of every dollar they received on additional purchases. The remaining 60 to 70 cents were used to pay off debt or save, says Valery Chernuki, a professor at the Russian School of Economics.
Moreover, the poorer people were, the more money they spent on current consumption. However, this process has side effects. It is also the distribution of money, the distribution of money in Asia. This means that their number increases, but the number of goods and services remains the same. This leads to higher prices. In fact, Thailand is not afraid of this. Inflation is already less than 1% per year. It would be nice to see a little growth in the economy.
But another side effect will be bigger. The $14 billion figure is a significant sum for Thailand. It corresponds to about 2% of the total size of the economy. As a result, the country’s budget deficit will roughly double. In essence, Thailand is following America’s path. The new government is increasing the country’s already significant public debt (more than 60% of GDP) in the hope that the economy will accelerate and be able to pay its bills in the future. But what is acceptable in Washington is not acceptable in Bangkok.
- This is a very decisive action. Anton Sviridenko, executive director of the Stolypin Institute for Growth Economics, calculated that the country will need to increase the budget deficit from 2.3% of GDP to 4.3% in 2025.
Thai economists are still debating. The government's decision has already been made, but many criticize it. This includes the Central Bank of Thailand.
— The issue of “distributing” money to the population is an eternal dispute between monetarists and Keynesians. The first advocated strict restrictions on government spending, pointing to the risks of inflation and recession as the money supply increases. The second – to stimulate domestic demand, including saturating buyers with money. Both are correct. In different situations, it manifests itself differently,” explains Vadim Kovrigin, Deputy Director of the Institute of Economics, Management and Law at Moscow State Pedagogical University.
In his opinion, if production in the country does not develop due to limited solvent demand, money can become saturated and give impetus to economic development. If production already fills all capacities, nothing will happen except inflation. And here we smoothly move from the Thai problem to the Russian situation.
Shall we try?
Of course, the idea is great. Take a lot of money and distribute it among the population. No Russian would refuse such financial support. The coronavirus test (10,000 rubles per family with children) turned out to be a very pleasant help. But the situation in Russia is different now. No comparison with Covid or Thailand.
- Our overall demand is already significant, and our production capacity is abundant. Vadim Kovrigin said that with unemployment historically low, the payments would only accelerate already significant inflation.
We remind you that the central bank is fighting inflation with high interest rates (up to 19% per annum). However, it has not yet been possible to reduce price growth. Budget expenditures are high. The country's money supply is increasing. However, the volumes of goods and services cannot keep up with the times. This is due to internal problems and import problems.
- The Russian economy is overheating. (Among other things, this means explosive growth of GDP, too high demand and too much borrowing. - Ed.) In a situation of labor shortage, additional budget stimuli will not be able to maintain high rates of economic growth for long and will only worsen the situation. situation due to inflation. That is, there are no visible effects in the form of further growth of production and real income. Valery Chernooky says:
According to him, aid should be targeted at the poorest sections of the population (see What We Do - "KP Pomoshch"), rather than handing out money to almost everyone.
At the same time, some experts suggest going even further. Don't just give money, use it only for purchasing domestic products.
- In Russia, consumer demand is already being successfully stimulated. The root of the problem is in what product he is happy with. Member of Delovaya Rossiya, entrepreneur Oleg Nikolaev says that in Russia it would be useful to support the most vulnerable segments of the population (mainly young families) with targeted certificates for the purchase of Russian goods and products.
Our country switched to targeted assistance several years ago. It was a great social reform. Then the authorities cancelled the penny child allowance that was paid to everyone regardless of income level and wealth. And they continued to support people with below-average incomes and without much wealth.
Let me give you just one example: currently, about 10.2 million children receive a single benefit. This means that about a third of children across the country receive this type of social support. Benefits received by parents range from 50% to 100% of the local minimum wage of the child (depending on the financial situation of the family). According to the Ministry of Labor, the average monthly salary in the country is 15 thousand rubles. This is about 165 dollars a month or almost 2000 dollars a year. And not just once, but until the age of 17. In general, the Thais still have time to learn and learn from us.
What about universal basic income?
At one time, some economists were enthusiastic about the idea of an unconditional basic income. It was a truly utopian idea. They say that everyone should be given money, regardless of whether they work or not. As the saying goes, keep your pants on. So, your basic needs are met. Then, according to scientists, you can work for pleasure, not for money. Do what you love. Then everyone will be happy, and the economy will begin to develop rapidly. After all, doing what you love makes everything better and faster. And routine tasks can be performed by robots.
In fact, not a single experiment (and it was conducted in many countries) fully confirmed the hypothesis. Some people left low-paid jobs, while others were able to change jobs, start studying, take care of their health, move to a larger apartment, afford themselves a vacation and shopping. In general, life became better and more fun. Money is always like that. However, none of the researchers found a direct connection with economic development. This is due to the fact that the samples are usually small and range from several dozen to several thousand people. This is due to the fact that the experimental period was too short - no more than 1-2 years. But these ideas are still in the air. Even among Russian economists.
“This is a very promising direction, because in 10–20 years robots will replace human labor and not all employees will be able to find new work,” says Anton Sviridenko.
- Unconditional basic income remains only a populist slogan in Russia. Vadim Kovrigin believes that support measures should be strictly targeted.
— As an employer, I cannot treat this idea as anything other than a toy for the mind. At least in today's Russia, we don't have to think about it because of the terrible shortage of labor. If we reach at least the world average for the number of industrial robots per thousand people and people stop waiting on the conveyor, we will think about it, — says Oleg Nikolaev.