Ibrahim Athif Shakoor
This article is part of Covid 19: Stimuli and Beyond edition of the Journal of the Maldives Economic Review, Volume 1, Issue 3, March 2020
Analysts throughout the world are emphasising, nay insisting that Governments not make the mistake they did in the 2008 recession by targeting financial assistance packages almost exclusively to the big corporations and large banks. That this time around, even if difficult to implement, that the assistance must be delivered to the employee, the mortgage holder and the SME entrepreneur instead of to the large banks and the big corporations. Analysts and writers from a variety of sources from individual blogs to respected news corporations like New York Times and even Bloomberg are cautioning against offering large bail out parcels focusing on corporations, effectively without proper oversight. Mostly because such mammoth corporations have shown that they have used such crises to advance their own interests and pad the pay package of their senior executives and their retirement options. Banks have returned stronger and wealthier than before the 2008 recession and that it is the individual mortgage holders, often the most vulnerable who lost their savings and their homes. To be fair, it is easier and more convenient for the state to send a large heap of money directly to large corporations and announce the total value of such packages as the value of the stimulus package delivered. The latest US stimulus package, the 3rd one, was held up at the Senate, because Democrats had refused to accept measures benefiting big corporations including a USD 500 billion (that’s billion with a capital B) aimed at large corporations at the discretion of the Treasury Secretary with no effective oversight. Fiscal stimuli offered by our state already have elements directly targeting the end user. No doubt, as the recession deepens there will be additional measures put in place. We are optimistic that additional stimuli will directly help individual, the citizens. The employee who is asked to stay at home for three months. The crew of the fishing dhoni who is unable to sell his harvest. The homeowner who finds it difficult to pay her utility bills. The small entrepreneur who has to seek extensions on capital AND interest payments to the bank. The many many Maldivian families who have to pay rent bills, the wholesome rent reductions offered by many many landlords notwithstanding. Fiscal stimulus, while difficult to implement, it is agreed by many analysts now, is best targeted at individuals and families directly rather than to the large corporations and to the banks.