Moral hazard issues are endemic in financial crises, as we all know from the most recent GFC triggered from subprime mortgages. As we are witnessing a bazooka round of government aid ready to hit the market, the moral hazards are being revisited.
I will attempt to stay on topic and not comment on social & political issues around the current stimulus policy decisions in each country. I will focus on how technology can be used to make things better in these circumstances.
In America the government, the states, the municipalities, the cities are far from being Digital, let alone having technology that allows them to track flows of the money flows allocated in the economy.
A “stimulus package to the American worker” is underway that practically means a check of $1,000 or $1200 to pay rent, bills or buy groceries. The details of who and how this check can be claimed are going to be announced soon.
Americans will receive by traditional mail, a check and will have to be creative on spending it as bank branches are unable to service these deposit needs. American may countersign the check to their landlord or create a community secondary market of checks that is facilitated by those that have cash from ATMs (good for grocery shopping).
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Juxtapose this with the Digitization in Singapore. In 2016, Singapore announced the launch of the Government Tech Agency
A long-term plan to digitize the functions of governance and public life.
I pick the Singaporean example of GovTech led digitalization (there are other well-publicized ones, like Estonia) because in these `never seen before` circumstances they were able swiftly to launch three services
TraceTogether A community-driven contact tracing app to help during the COVID19 spread. Own your data and use Bluetooth P2P communications to share your close contacts. Give permission to the Ministry of Health to quickly reach out to your close contacts if you are a COVID-19 patient. TraceTogether aims to protect families and communities, and stop the spread of COVID-19.
MaskGowhere An app to use your zip code and get info on mask distribution points
FluGowhere An app to facilitate the following: If diagnosed with any respiratory illness (even just a cold) you get full subsidy for medical treatment
Now imagine if America or state by state had built a GovTech ecosystem that would allow to not easily channel each of this one off payments but also to transparently trace that they are used accordingly.
Transparency of money flows would be a blessing in this situation. It would save the government and the citizens from all the moral hazards that were experienced during the GFC. One of the most eye-popping examples were banks that were eligible for favorable loans with subsidies which they subsequently used for share buybacks.
The digitalization of municipalities, states and governments is not only about operational savings but also about Transparency that can allocate capital and manage risks in a fairway.
So much to learn from other Smart nations, states, or cities.
Singapore has two kinds of IDs …
CorpPass, a digital identity to do business efficiently and safely online with the government.
MyInfo simplifies banking transactions by eliminating the need to re-produce documents for verification.
And on and on…
The Technology is available and inexpensive, the people to customize it for each country, state, city, are available, and the Need is screaming. Come on America, Switzerland, United Kingdom, Germany, ….
Come on New York State, Canton de Vaud, England, Bavaria,…
A boom in GovTech initiatives should be one of the positive side effects of this crisis. And since I am a BIG DREAMER, maybe we will finally get a Decentralized Digital Identity so that it can serve as a way to act collectively in similar situations that we all have the same interests and risks.