Our idea is the introduction and distribution of non-transferable consumer vouchers with a short validity period. The Ministry of Finance would deposit a certain amount of cryptocurrencies into citizens’ accounts (one cryptocurrency is worth one kuna). Entrepreneurs could use the received cryptocurrencies to settle their obligations to the state.
Crisis periods lead consumers to make more rational consumption decisions, meaning they spend less. This is confirmed by the situation we have had in the last two months with the coronavirus – it significantly affects the decline in personal consumption: (1) due to the forced hibernation of most economic activities that accompanies measures to mitigate the epidemic’s consequences, (2) noticeable uncertainty among citizens regarding expected future income, and (3) uncertainty about the duration of the crisis, all of which leads consumers to spend less and avoid spending on anything that is not essential for survival.
Primary needs, such as food and drink, housing, and energy consumption, are part of consumption for which the population must allocate funds regardless of the movement of their disposable income. However, this is not enough to ensure the level of consumption necessary to mitigate the effects of the crisis. Since personal consumption is the largest macroeconomic aggregate with a significant impact on economic movements, business cycles, and with an average share of three-fifths in GDP in Croatia, it is essential to strongly encourage people to continue behaving according to their usual consumption habits.
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Directly stimulating consumption
The state must strengthen personal consumption through active measures, but talking about positive tax reforms that could partially ensure this is unrealistic, as is expecting favorable movements in the labor market in the upcoming period. In addition to ensuring conditions in agreement with banks to provide a range of consumer loans while maintaining low interest rates with a moratorium on existing loans to citizens, the state needs to devise additional measures to directly stimulate personal consumption.
Some believe that the expected level of income in the short term can be ensured by evenly distributing additional or basic income to all citizens. This form is advocated in some countries as a return to the paradigm of fairness and social balance and the removal of additional consequences of rising inequality accelerated by the coronavirus crisis. For example, in the Scottish Parliament, the idea of the ruling majority to introduce a recovery basic income was presented, and the Speaker of the U.S. Congress, Nancy Pelosi, stated that the idea of universal income is ‘valuable and deserves attention’.
However, distributing a monetary amount to all adult citizens as one of the possible options to be discussed is not a guarantee of quickly stimulating consumption in such crisis conditions and reviving economic activities. Part of the distributed income may end up in one of the forms of savings, which negates the primary purpose of better crisis management.
Our idea is the introduction and distribution of non-transferable consumer vouchers with a limited validity period that can be used to pay for goods or services in the domestic final consumption market. This would likely (but not in all situations) increase overall indebtedness as the state would have to intervene, but it would create the preconditions for mitigating the impending recession and preventing the worst scenario of economic stagnation. The concept would be as follows: each adult citizen would receive a voucher of the same amount, thus satisfying the criterion of social justice. There would be a deadline within which the vouchers must be used (e.g., six months). After the expiration of the validity period, they would become worthless.
The modified approach would not limit the distribution of vouchers only to adult citizens due to the potential discrimination of families with children. If the distribution of vouchers also included children, then the range of goods and services that could be purchased with the voucher would increase in both scope and structure, thus the effects of this measure would also be greater. Such an activity, along with other measures, could revive consumption again, and consequently, the entrepreneurial offer in the market. It is clear that such distribution requires rigorous rules to prevent any form of speculation and manipulation.
It is important to note that this is a short-term measure whose effect would be an incentive to change consumption habits in a crisis and which cannot substitute for other important aspects of economic recovery and instruments that facilitate exiting the crisis. Positive consequences would be felt by all sectors that have an offer in the domestic market.
The concept of voucher distribution can be adjusted, if a precise simulation is made, so that the budget deficit and public debt do not increase. It is possible to adjust the voucher concept so that the state simply ‘renounces’ part of the taxes and contributions (which it would not collect anyway) because the tax base for that part would not even exist. On the other hand, it directly affects GDP growth.
Using the blockchain platform
Moreover, it would be useful in introducing consumer vouchers to manage and technologically step forward by using the blockchain platform. The category of connected blocks has proof-of-authority (no mining) for which ready-made software solutions exist and is quickly and easily implemented. Thus, the selected system operator (APIS, SRCE) would automatically generate accounts according to the OIB for all (adult) citizens, and access would be authorized using a password that would again be automatically generated by the system operator.
The Ministry of Finance would deposit a certain amount of cryptocurrencies into citizens’ accounts (one cryptocurrency is worth one kuna). After purchasing a good or service, the buyer uses a mobile application to pay or transfer the corresponding amount of cryptocurrencies to the seller’s account. Accounts would be regularly fiscalized (see image). At the end of the accounting period, businesses would transfer the received cryptocurrencies to the Ministry of Finance’s account. They can be used to settle tax obligations, possibly contributions, etc. It is not possible to obtain kunas for cryptocurrencies. After receiving the cryptocurrencies, according to the proposed concept, the Ministry of Finance would destroy them and delete all accounts at the end of the period.
We are confident that consumer vouchers would be a much better solution than the so-called tourist CRO card, whose future failure is unfortunately easy to predict. There will be plenty of unused capacities in the tourism sector, so it should be allowed for vouchers in cryptocurrencies to be used in accommodation tourist capacities. Namely, it is likely that around thirty million hotel nights will remain unused by the end of the year. Hypothetically, this would be enough for, in a highly optimistic scenario, every citizen to spend a week on vacation paid for with a voucher, i.e., cryptocurrencies.
We can consider an alternative situation where the duration of the vouchers would not be limited, but here our understandings of the usefulness and feasibility of such a measure in the given conditions differ. In that case, the offer of vouchers must be limited by an acceptable structure and could not be widely opened in the domestic market. It would be necessary to predefine a catalog of goods and services that can be purchased with consumer vouchers, which would create a number of problems that would need to be solved. In doing so, it would be necessary, among other things, to ensure that part of the consumption that would otherwise occur when paying with kunas is not displaced. The basis would be to stimulate consumption for which there are unused capacities in part of the economy. For example, it would be necessary to create an online catalog of goods and services that can be purchased with consumer vouchers, or to create a kind of exchange that would be strictly regulated. Consumer vouchers would be welcome in a crisis, but there is no reason they should not last even after it as long as there are some unused capacities in the economy. Their value would dynamically adjust to the current offer.
And sociopsychological effects
In addition, it is possible to examine the premise of the non-transferability of consumer vouchers. Someone might conclude that the transferability of vouchers, along with the effects of eliminating speculation and transparency, reduces their possible effect. There is a viewpoint that free trade in cryptocurrencies should be allowed without taxes so that citizens could assess what would be more profitable for them. The key limitation would be, according to such a viewpoint, that cryptocurrencies could only be used to pay taxes and contributions that arose from the sale of permitted goods and services. Here, the opinions of the authors of this text diverge. We agree that consumer vouchers would have direct economic effects (a few percentage points less decline in GDP, depending on the value of the vouchers), but also noticeable sociopsychological effects due to social recovery from the shock caused by the health and economic crisis.
In conclusion: without the recovery of personal consumption, there is no prospect for mitigating the recession, but that is by no means enough. At the same time, it is necessary to approach radical structural reforms and radical changes in the state and public sector aimed at increasing the efficiency of public services. It should not be forgotten that maintaining economic activities, recovery, and future growth, in addition to increasing personal consumption, should be based on strong domestic and foreign investment activity and increasing the export orientation of the Croatian economy.
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