Governments across the rich world have spent anywhere between 4 and 21 per cent of their countries' gross domestic product to stimulate their coronavirus-ravaged economies. A substantial portion of these stimulus packages has been aimed at boosting the purchasing power of individuals and small businesses. But there is evidence to suggest that they are not having the desired effect on consumer spending, thereby pushing governments to consider announcing more such packages in the near future.
Researchers in the US and Europe point out that people have tended to use the money they received from stimulus funds to pay for necessities, including food and rent, more than they have on luxuries, such as electronics, furniture and cars. The outcome – as concluded by researchers from the Kellogg School of Management at the US-based Northwestern University – is that the "stimulus checks didn't stimulate the hard-hit areas of the economy like manufacturing or retail".
This means that governments need to rethink their stimulus packages before they run out of money. But what can they do?
James Duesenberry, a former Harvard University economist, once wrote: "Economics is all about how people make choices, but sociology is all about how they don't have any choices to make." I would add to this notion by saying that the way people spend their money today is largely determined by their access to enabling technology.
Lawyer Timon Karamanos works from home following the Covid-19 outbreak in Athens, Greece. Unfortunately, not everyone around the world is able to do so. Reuters
For example, it was only after the invention of the Diners Club Card in 1949 that consumers could access financial resources that were previously not immediately available to them. Just consider how limited a person’s choice would be at a restaurant or a shop that only accepts cash as a form of payment.
Electronic payments generally require access to a bank account and to electronic banking. But there are countries in the emerging markets where a majority of people do not have access to an account, let alone net banking. Only 3 per cent of India’s population have access to a credit card, according to data sourced from Reserve Bank of India, compared to around 68 per cent in Japan and the US.
Governments have come to take for granted the availability of many established technologies, such as the internet and the various modes of transportation. Yet these ubiquitous technologies are not as available to everybody as one might assume. The rate of car ownership, for instance, is as high as 838/1,000 adults in the US, according to the Federal Highway Administration, a the US government agency. But it is only 22/1,000 in India and under 10/1,000 in many African countries. The same can be said about air and train travel in emerging markets.
In today’s world, goods and services are increasingly bundled with technology. The app store is bundled with the smart phone, just as the mall is bundled with the car. And yet technology does not seem to feature a great deal in governments' study of consumer choice, as is evidenced in the lack of effectiveness of some of the stimulus packages.
In July, the EU approved a €750 billion economic stimulus plan. Bloomberg
Governments would be wise to consider the effect of technology scarcity on the effectiveness of these packages.
Access to broadband, transportation, smart wearables and intelligent home and office technologies could hold the key to an effective stimulus. In this respect, governments could earmark some of their funds to enable small firms and households to adopt or upgrade the necessary technology to participate in the economy, both as consumers and producers. They could subsidise the cost of high-speed internet connection, software, smart home appliances and personal wearables.
It is evident that working from home and remote learning have only been made possible in countries and communities where broadband access is available and reasonably priced, as well as in places where ownership of video-enabled phones, laptops and tablets is high.
It is therefore important for governments to recognise that technology is a “necessity resource” that helps to unlock other resources. Furthermore, they should identify technology scarcity as a separate subject of economic policy.
Lionel Robbins, a former professor at the London School of Economics, once defined the subject matter of economics as "the study of the allocation of resources, under conditions of scarcity". However, allocation itself is often influenced by technology. In fact, technology has become a condition for participation in various aspects of economic life, whether they relate to production or consumption. This is especially observable in regions and communities where access to technology is beyond reach.
Without adequate and affordable access to technology, human agency will continue to fall short. On a macroeconomic level, it will almost certainly render obsolete any government's economic recovery policies despite its best intentions.
Sami Mahroum is a professor at the Free University of Brussels
Multitasking pays off for money goals
Tackling money goals one at a time cost financial literacy expert Barbara O'Neill at least $1 million.
That's how much Ms O'Neill, a distinguished professor at Rutgers University in the US, figures she lost by starting saving for retirement only after she had created an emergency fund, bought a car with cash and purchased a home.
"I tell students that eventually, 30 years later, I hit the million-dollar mark, but I could've had $2 million," Ms O'Neill says.
Too often, financial experts say, people want to attack their money goals one at a time: "As soon as I pay off my credit card debt, then I'll start saving for a home," or, "As soon as I pay off my student loan debt, then I'll start saving for retirement"."
People do not realise how costly the words "as soon as" can be. Paying off debt is a worthy goal, but it should not come at the expense of other goals, particularly saving for retirement. The sooner money is contributed, the longer it can benefit from compounded returns. Compounded returns are when your investment gains earn their own gains, which can dramatically increase your balances over time.
"By putting off saving for the future, you are really inhibiting yourself from benefiting from that wonderful magic," says Kimberly Zimmerman Rand , an accredited financial counsellor and principal at Dragonfly Financial Solutions in Boston. "If you can start saving today ... you are going to have a lot more five years from now than if you decide to pay off debt for three years and start saving in year four."
Starring:Sydney Elizebeth Agudong, Maia Kealoha, Chris Sanders
Director: Dean Fleischer Camp
Rating: 4.5/5
If you go: The flights: Etihad, Emirates, British Airways and Virgin all fly from the UAE to London from Dh2,700 return, including taxes The tours: The Tour for Muggles usually runs several times a day, lasts about two-and-a-half hours and costs £14 (Dh67) Harry Potter and the Cursed Child is on now at the Palace Theatre. Tickets need booking significantly in advance
Entrance to the Harry Potter exhibition at the House of MinaLima is free The hotel: The grand, 1909-built Strand Palace Hotel is in a handy location near the Theatre District and several of the key Harry Potter filming and inspiration sites. The family rooms are spacious, with sofa beds that can accommodate children, and wooden shutters that keep out the light at night. Rooms cost from £170 (Dh808).
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), EsekaiaDranibota (Harlequins), Matt Mills (Exiles), JaenBotes (Exiles), KristianStinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), EmosiVacanau (Harlequins), NikoVolavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), ThinusSteyn (Exiles)
The BIO
Favourite piece of music: Verdi’s Requiem. It’s awe-inspiring.
Biggest inspiration: My father, as I grew up in a house where music was constantly played on a wind-up gramophone. I had amazing music teachers in primary and secondary school who inspired me to take my music further. They encouraged me to take up music as a profession and I follow in their footsteps, encouraging others to do the same.
Favourite book: Ian McEwan’s Atonement – the ending alone knocked me for six.
Favourite holiday destination: Italy - music and opera is so much part of the life there. I love it.
Essentials
The flights
Whether you trek after mountain gorillas in Rwanda, Uganda or the Congo, the most convenient international airport is in Rwanda’s capital city, Kigali. There are direct flights from Dubai a couple of days a week with RwandAir. Otherwise, an indirect route is available via Nairobi with Kenya Airways. Flydubai flies to Kinshasa in the Democratic Republic of Congo, via Entebbe in Uganda. Expect to pay from US$350 (Dh1,286) return, including taxes. The tours
Superb ape-watching tours that take in all three gorilla countries mentioned above are run by Natural World Safaris. In September, the company will be operating a unique Ugandan ape safari guided by well-known primatologist Ben Garrod.
In the Democratic Republic of Congo, local operator Kivu Travel can organise pretty much any kind of safari throughout the Virunga National Park and elsewhere in eastern Congo.
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
