The latest front of war on cash
Together with Germans and Greeks, Italians have long been the most stubborn and steadfast of Europeans in their love of cash. For years, they have resisted cards and digital payments and viewed with deep suspicion most campaigns to convert them. To a significant extent, they also saved in physical notes, especially older adults, keeping their “rainy day” funds outside the Italian banking system, which has given them plenty of reasons to question and to mistrust. Just a year ago, there was no reason to think this defiance would waver, at least not anytime soon. But then the pandemic hit, followed by the one of the longest and harshest lockdown policies on the planet. By the time the “second wave hit” and another round of mass closures and self-isolation orders came to pass, countless Italians were stuck at home, forcing daily transactions online. And that’s when the government hit, exploiting this lack of payment alternatives and the practical inability to use cash.
The Cashback scheme
A new initiative was launched in December, just in time for the holiday shopping, offering a 10% cashback from the state to citizens who make their purchases with a card or smartphone. They just have to download and register with the government’s own app and they can receive refunds of up to 150 euros. The scheme covers all kind of spending too, including “purchases made in shops, as well as payments to craftsmen, plumbers, electricians, a lawyer or a doctor,” according to a finance ministry spokesman. Given the dire financial straits that so many Italians now find themselves in, along with months of isolation and no way to spend real cash anyway, it is no wonder that the campaign was a raging success. More than 10% of the adult population signed up in the first couple of weeks and according to official data, the total value of reimbursements to be paid already exceeds 222.6 million euros.
And that was just the pilot stage of the program. It will be fully operational and expanded starting in January 2021, with the updated list of refundable payments including car taxes, insurance, and fines. More importantly, there are now also special gifts, rewards and competitions for participants. There is a “Super Cashback” of 1,500 euros for participants who manage to complete the highest number of digital transactions in a set period, as well as a “receipt lottery”, where the more money one spends using a card, the more chances they get to win prizes of tens of thousands of euros every week and month, and even the annual grand prize of 5 million euros.
At first glance, this whole concept might look like a fun and engaging way for the state to stimulate the economy and maybe stem tax evasion a bit while they’re at it. However, if one stops and actually thinks about it, it really is as politically cynical and spine-chilling as it is economically absurd. For one thing, there is an obvious agenda behind the scheme, which is part of the government’s broader “Italia Cashless” plan. This plan is presented as a campaign against tax evasion, which is all well and good, but as we know from recent history and similar initiatives, there’s a lot more to any campaign against cash than simply improving tax compliance. Privacy is a core concern, as is the loss of control over a citizen’s own money. We’ve seen just how aggressively this power can be wielded and abused by governments. Not in the distant past, but only a few years ago, and not in some far away developing nation, but in EU member-states, we witnessed citizens being denied access to their own deposits. We saw Greek pensioners forced to stand in endless lines at the banks for their “cash rations”, the ludicrously low amounts they were permitted to withdraw from their accounts each week.
However, even beyond these grave concerns over citizens’ privacy, property rights and financial freedom, the design of the scheme itself is also severely misguided and extraordinarily irresponsible. We’re in the middle of the worst economic crisis in modern history, a time when countless Italians survive on state assistance, having lost their jobs and incomes, watching their savings dwindle and not knowing when and if they’ll ever find work and earn a living again. And this is the very moment their government choses to massively incentivize consumption.
Apparently, now is the time to go on mindless shopping sprees for stuff they don’t need or can afford, all to create some distorted, artificial demand to bring to life an economy that the government itself first put in a coma. Of course, it was that same mindless spending that’s been encouraged throughout the West by long standing policies that have been in place for years that put so many citizens in the extremely vulnerable position they find themselves today. The impact of the lockdowns and the shutdowns was multiplied by the low savings rates and the preexisting household debt, and now, whatever funds were given out in “relief packages” by the state must also be swiftly spent again, to perpetuate the cycle.
It is clear that this scheme, like so many others like it, is putting in place perverse incentives that will prevent any kind of financial independence. It’s not investing that it subsidizes, nor financial prudence and responsibility. It rewards consumption, and in particular that extremely toxic and self-destructive kind, that promotes “spending for its own sake”. What other outcome might one expect from state-sponsored competitions that encourage citizens to enter a race with each other to see who can spend the most?
Claudio Grass, Hünenberg See, Switzerland
This article has been published in the Newsroom of pro aurum, the leading precious metals company in Europe with an independent subsidiary in Switzerland.
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