Could Thailand's Cash Handout Scheme Have Worked?

The Diplomat

2 days ago

One of the consequences of the Pheu Thai party's implosion is that its signature cash handout scheme will go down with it. Granted, the program was already approaching rigor mortis before Prime Minister Paetongtarn Shinawatra got herself, her dynasty, and her party (and Thai politics) into a hot mess by running her mouth to a foreign leader. The first tranche was delivered to welfare cardholders and people with disabilities last September, and a second tranche to the elderly in January, but the bulk of the funds for most Thais has been scrapped, with Bangkok blaming Trump's tariffs, although more likely because the first two tranches did little to stimulate the economy through consumption, the entire point of the project. (Phase 3 would have given money to 16-20 year olds, and Phase 4 to 21-59 year olds).
Personally, I always thought the handout scheme was a good idea, but one unlikely to work given the mechanism, timing, and who was in charge. I don't think it would be a particularly controversial statement to say that Pheu Thai, and especially prime ministers Srettha Thavisin and Paetongtarn Shinawatra, were woeful articulators who couldn't explain why the scheme was necessary and what it intended to achieve. Srettha might have been a competent bureaucrat, but he was an appalling salesman. Likewise, Paetongtarn inspired little trust that she knew what she was doing, let alone in managing an unprecedented redistribution of state money. Recent surveys suggest that most Thais would still prefer the Phase 3 and Phase 4 handouts to proceed, but this is only around the 60 percent mark, which one might have expected to be higher when essentially they're being given money for free.
The biggest problem, though, involved the matter of distribution. The purpose of the scheme was essentially a stimulus package to promote consumption in the most immediate and (although never stated) frivolous ways. The government wanted people to spend it on washing machines, clothes, food, household repairs, etc. The sort of consumption you'd do if you won a small sum in the lottery, for instance. This was sensible. The Thai economy had been lagging behind for several years due to the COVID-19 pandemic, and many sectors of the economy (mainly local businesses) needed an injection of capital. Moreover, domestic consumption rates have been worryingly low in Thailand for some time, and there will be an ever bigger need for domestic consumption as the population ages (for several complex reasons).
While agnostic on ideas like Universal Basic Income, I am strongly in favor of a national dividend and have been since I first read Thomas Paine's Agrarian Justice (1797), which argues that all landowners should pay a ground rent that will be distributed as a dividend to each citizen upon reaching maturity. However, the mechanism for redistribution matters. It makes sense, for instance, that social benefits to the poor or unemployed are delivered in the form of cash or bank transfers (fiat currency, in other words), since, in an ideal world, while most of that money will be spent, a fraction of it will be saved.
However, if you have a citizens' dividend scheme solely intended to boost consumption (like Thailand's), it makes less sense to deliver it in the form of hard currency. Firstly, that's because people could simply keep the money in their accounts, rather than spend it. Secondly, one of the obvious problems anyone could see before the scheme was enacted is that people could use the money to pay off debt. This meant the stimulus scheme largely became a transfer of wealth from the state to the banking sector. ('The impact of the handouts and the stimulus was less than we had expected,' central bank governor Sethaput Suthiwartnarueput told Reuters in January. 'The handouts that went out sometimes were used to pay down debt and whatnot, so you didn't see that translation into consumption.')
Had the Pheu Thai party asked, I would have suggested they distribute the sums in the form of digital gift cards with relatively short expiration dates and which could only be spent at select shops. This would have required recipients to spend the money on consumption (rather than paying off debt or putting it into savings); it would have forced people to spend the money at specific places (local shops) that the government wanted to support; and it would have compelled people to spend the money relatively quickly (meaning central economists could see some bang for the buck, thus disproving the naysayers).
Perhaps most importantly, a gift card would have had a novelty factor. It always seemed reductionist to have had the rather radical idea of transmitting $14 billion from the state to its citizens, yet to have decided that the mechanism by which this will be done is so utterly dull. People checked their phones and saw an extra 10,000 baht appear in their ledger or were simply given cash. In other words, like any other transaction.
Ideally, the government should have made this dividend transfer as unlike a normal transaction as possible. Perhaps the government shouldn't have even given everyone the same amount of money! You could have randomly allocated payments of 8,000 baht, 9,000 baht, and 10,000 baht. If you only received 8,000 baht and were a little pissed off, maybe you'd have had more reason to go out that afternoon and splurge it on a purchase. And if you were lucky to get 10,000 baht, then spending 2,000 baht on something you might not have bought previously would have seemed like a free shot.
In the end, the digital wallet mechanism was rational and relatively straightforward, as Pheu Thai would surely have been advised, yet sometimes an intuitive idea (giving people some money to spend) needs an unintuitive means of delivery.