Thursday, February 25, 2010

Lupu and his coupons

Have you ever had to stand in line at a supermarket while some one in front of you pulls out wads of coloured paper and meticulously counts them out to the shop assistant?  Have you ever waited while the shop assistant signs and stamps each sheet if paper and enters the serial numbers into his / her register?

This is where Marian Lupu and the Democrat Party want to take the Republic of Moldova.  A few weeks ago they came out in defence of petrol coupons, offering as an argument that there would be less competition in the market if petrol was purchased with cash.  Unfortunately that's an argument which I am too stupid to understand; everybody has cash while only a few have coupons...

Today Lupu wants to institute a system of meal tickets, ostensibly as a form of social protection for the poor.  The only advantage I can see here is political - the coupons would be a visible symbol that voters would connect with the Democratic Party.

The case against coupons is strong

  • They are of simpler design than cash and hence easier to counterfeit
  • They are difficult to control and can be used to evade tax as they are outside the monetary system
  • An expensive bureaucracy needs to be created to print, distribute and clear the coupons.  This makes them less cost-efficient than cash for delivery of social services
  • They have a limited purpose, i.e. they are designed to patronise the poor by telling them what they can and cannot buy with their money.
  • They slow down economic activity (e.g. the queueing issue I mentioned above)
I applaud Mr Lupu for floating new ideas to improve the lot of the poor.  This one, however, needs to be buried quickly.

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