[Op-Ed] Coupon Economy

Regardless of time and place, an economic slowdown hits low-income households first because they are the most vulnerable. Charles Wheelan, an economist and the author of the bestselling book “Naked Economics,” said, “In reality, a purse wields more power than conscience,” and “When the economy slips into recession, laid-off workers, not doctors and college professors, are hit the hardest.” No matter what causes an economic downturn, an increase in the number of poor households can lead to social and political unrest.

To rev up sapping consumption, a slew of countries are presenting policies to give their people cash or consumption coupons. The Korean government is also considering doing the same for low-income families with supplementary budget. If the economy was not in such bad shape, many would oppose any type of direct state support because it discourages the incentive to work. Given that the whole world is struggling with plunging domestic demand and with traditional economic paradigms rendered useless, the government has no luxury to choose one over the other. Economic policies being presented by other countries are aimed at not only boosting social welfare but also recovering the economy and easing social conflict.

Though conflicting opinions remain over whether cash or coupons are more effective, this is no time to engage in a theoretical debate over each method’s pros and cons. The government must base its judgment on practical support for low-income households and economic stimulus effects in its choice and make a prompt decision. Yet considering the prospect that cash will end up in banks rather than being used to purchase goods and services, the coupon option seems to hold more promise.

To maximize the effects of coupons, the government should set short expiration dates to get recipients to use them immediately and extend the scope of goods and services that coupons can purchase. If the coupons have the advantages of both cash and gift certificates, they will benefit recipients and boost domestic consumption at the same time.

Editorial Writer Kwon Soon-hwal (hkwon@donga.com)