Why Thailand’s Universal Basic Income Program Will Likely be a Catastrophic Economic Failure
Universal Basic Income (UBI) has been championed as a revolutionary solution to poverty and economic inequality.
However, despite its utopian appeal, UBI is fraught with pitfalls that undermine its effectiveness and sustainability. I argue that UBI can lead to financial irresponsibility, increased inequality, and social disintegration.
By providing income without requiring work, UBI risks eroding the value of employment, reducing incentives for participation in the workforce, and fostering dependency. Individuals gain not only income but also purpose, skills, and social connections through work.
Disconnecting income from productive work also leads to social decay, higher crime rates, and family breakdowns.
Furthermore, the immense cost of UBI can strain national budgets, necessitating higher taxes or cuts in essential services. Funding a UBI that ensures a decent standard of living for all citizens would lead to ballooning deficits and economic instability.
In This Article
- Overview of Thailand’s New UBI Program
- Economic Implications of the Digital Wallet Scheme
- Criticisms and Concerns Surrounding the Plan
- Future Prospects and Potential Outcomes
Thailand is set to begin its Universal Basic Income (UBI) rollout in less than two weeks, a move that has sparked significant debate.
This controversial $13.8 billion plan, known as the Digital Wallet, aims to distribute digital cash to millions of citizens in an effort to stimulate the economy. However, critics argue that UBI schemes are detrimental to society and question the long-term benefits of such a program.
Overview of Thailand’s New UBI Program
Starting August 1, eligible Thai businesses and individuals can register for the Digital Wallet program.
Prime Minister Srettha Thavisin announced that 50 million citizens will receive 10,000 baht (approximately $275) in digital money to spend at local businesses. This initiative was a major campaign promise of the Pheu Thai party, with the government claiming it will boost the economy by increasing consumption.
Economic Implications of the Digital Wallet Scheme
The government predicts that the stimulus will increase Thailand’s GDP growth by 1.2 to 1.6 percentage points.
Despite these optimistic forecasts, the program’s financing has been a significant challenge. Initially, the state Bank for Agriculture and Agricultural Cooperatives was expected to cover part of the funding. However, due to financial warnings, the project will now be funded from the 2024 and 2025 fiscal budgets.
Criticisms and Concerns Surrounding the Plan
Economists and financial experts have voiced strong criticisms against the Digital Wallet scheme. They argue that such handouts are an ineffective way to achieve sustainable economic growth.
Deputy Minister of Finance Julapan Amornvivat announced that the budgetary funding became feasible only after the cost estimate was reduced to 450 billion baht ($12.4 billion). Despite the lowered cost, the program faces skepticism regarding its long-term economic viability.
Several reasons highlight why UBI, including Thailand’s Digital Wallet, is a bad idea:
- Financial Irresponsibility: Universal distribution of funds, even at modest levels, is often unaffordable. This can lead to increased deficits and necessitate higher taxes or cuts in essential services like healthcare and education.
- Increased Inequality and Poverty: UBI can lead to higher inequality by reallocating targeted welfare benefits to a universal grant, reducing the resources available to the most needy.
- Undermining Social Cohesion: Delinking income from work may erode social structures, leading to increased crime, substance abuse, and family breakdowns in areas with high unemployment.
- Reduced Incentives to Participate: While stronger safety nets are essential, UBI may discourage individuals from seeking employment, retraining, or moving for better opportunities, potentially fostering a culture of total government dependency.
Future Prospects and Potential Outcomes
While the government touts the Digital Wallet as an economic savior, there are doubts about its effectiveness and sustainability. The World Bank’s Thailand Economic Monitor projects a modest GDP growth of 2.4% for 2024, far below what the government hopes to achieve.
Moreover, limiting the UBI to lower-income Thais has sparked debates about fairness and the actual impact on poverty alleviation.
The Bottom Line
Thailand’s ambitious UBI rollout is a bold attempt to revive a struggling economy. However, the criticisms and challenges it faces suggest that its success is far from guaranteed.
As the country moves forward with this unprecedented program, the world will be watching closely to see if it can truly deliver on its promises or if it will falter under the weight of its own ambitions.
Supporting Article: Thailand is set to roll out a controversial $13.8 billion handout plan in digital money to citizens
