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The UBI debate comes to Moscow Russian economists are drawing on the U.S. to recommend handouts of about $125 per person. Despite the coronavirus crisis, Moscow’s Central Bank has said no.

Source: Meduza

U.S. lawmakers and executive officials are considering an emergency policy that would issue $1,000 to each of the country’s adult residents regardless of economic status. Some politicians, such as Democratic presidential candidate Bernie Sanders, are calling for monthly payments of $2,000 per household, and a number of other countries have implemented emergency income measures already. Each policy is limited in its own way: In Australia, payments were issued to pensioners and low-income earners only, for example, and in Thailand, a proposal for small cash payments to individual groups failed to earn popular support.

All of these steps gesture, however vaguely, toward the possibility of universal basic income (UBI), increasing the policy’s stature on the world stage. However, in Russia, any discussion of UBI remains purely theoretical. In fact, the country’s Central Bank has already come out against the idea or any short-term form of it, saying Russia has sufficient plans to combat the coronavirus pandemic as it is.

The question of cash payments to Russian residents emerged in force following an opinion piece in the respected newspaper Vedomosti by Konstantin Sonin, a professor of economics at the University of Chicago and Moscow’s Higher School of Economics. Sonin argued that the Russian government should distribute 10,000 rubles (about $125) to every Russian citizen, making for a total budgetary outlay of about 1 to 1.5 trillion rubles (between 10 and 20 billion dollars, give or take). In theory, the money could come from Russia’s National Wealth Fund, which was stocked with more than eight trillion rubles as of February 2020. That excess came from surplus oil sale profits, some of which will now be redirected back to the federal budget as oil prices drop. The National Wealth Fund will also be part of a complex financial scheme to support the Russian ruble. However, there is an awful lot of money in the fund, and emergency measures are exactly what it was originally intended for.

Despite the ostensible availability of money for universal payments in Russia, the country’s financial authorities have already shot down the idea. On March 20, Central Bank head Elvira Nabiullina said that there is no need for direct payments in Russia because the government and the Central Bank already have enough traditional tools to support the country’s population and its economy.

Nabiullina’s response implied that the Central Bank is assuming Russia’s economic growth will not decrease too severely. In that scenario, the greatest short-term threat officials face is likely rapid inflation stemming from falling oil prices that have caused the ruble to depreciate rapidly. Nabiullina acknowledged that widespread self-isolation and business closures will limit inflation growth during the course of the COVID-19 epidemic. Nevertheless, dishing out more than a trillion rubles to the population wouldn’t help in the government’s fight against inflation by any means. On March 20, the Central Bank even made the decision not to decrease its benchmark rate, which would have made rubles cheaper for banks, businesses, and ordinary citizens. The Bank appears to consider that kind of support unnecessary at this point in the COVID-19 epidemic because it does not expect a steep decline in manufacturing or a spike in unemployment.

According to Sonin, the economics professor, the Russian government’s optimism seems out of line: It is likely that the Russian economy is headed for recession, and the combined effects of quarantines, falling oil prices, and a global economic crisis will hardly respond to conventional stimulus spending alone (of which the Russian government currently plans to provide 300 billion rubles, or about $3.76 billion). Sonin also noted that Russian residents will be losing a significant chunk of their real income due to the ruble’s devaluation.

If a full-scale economic crisis breaks out in Russia, then the government will be forced to increase its stimulus spending. That money will have to come from the National Wealth Fund even though additional outlays could require breaking Russia’s budgetary rule, which requires that the Fund be at least seven percent as large as Russia’s GDP if any money is to be withdrawn from it. In short, Sonin concludes, direct short-term payments to Russian residents would be a faster, more effective means of economic support than traditional industrial and social policies.