This morning's Telegraph main story (care of a BBC tweet) is:
Let's be clear about this: there is no case for helicopter money.
Helicopter money is a Milton Friedman idea. Do you need any further explanation as to why it is wrong? What he proposed was that new government money - created for the purpose - be effectively given free to all members of the population to stimulate demand in the face of an economic downturn. As daft ideas go, this ranks high up on the list of bad ones.
Firstly, this is because this policy is indiscriminate. There are occasions, I admit, when universal benefits make sense. This is not one of them. If the aim is to stimulate demand then giving additional cash to those who are already saving, which is what the largest earning part of the population will already be doing, makes no sense at all.
Second, for those who think that this is equivalent to universal basic income, it is not: there is no commitment to perpetuate it, meaning that as a policy tool for addressing the issues that UBI deals with it also fails.
Third, and most importantly, this policy simply stimulates demand. Ignore for the moment the fact that this is exactly what we do not need if we are going to have a Green New Deal, and instead simply appreciate that there is no job creation element to this programme: it is instead a mechanism to suck in imports. Almost all the multiplier effect from such a proposal will, then, arise outside the country that starts the programme. It is an exceptionally poorly targeted program as a result, with very low multiplier impacts.
Fourth, if the aim is to instead create jobs, lasting prosperity, a Green New Deal and strong local multiplier effects by having the impact of government action revolve within local economies then helicopter money is the last thing that you would do. You would, instead, create a strong programme of investment, locally focused, requiring large inputs of local labour, with lasting local benefit, and a strong job creation focus. The Green New Deal policy of ensuring that all 30 million properties in the UK are energy efficient by 2030, with as many as possible turned into power generating units, is precisely that type of activity that we need. It is, quite literally, the polar opposite of helicopter money: it would create prosperity rather than a consumer boom, and would have low or no inflationary impact because the resources are available in a downturn for the programme to be undertaken without inflation risk, whilst as I have shown, there would probably be no tax cost because the entire investment programme could be funded by reallocation of existing financial capital.
So The Telegraph has this wrong. So too is Deutsche Bank (a failed entity if ever there was one), which is promoting it. And so too was Milton Friedman the thinking the bizarre idea up in the first place. Might we forget this idea now?
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But after Brexit there won’t be any imports other than for absolute essentials. So the risk of that will not be there.
/sarcasm.
It’s probably a device to equate government spending on Green New Deal initiatives with ‘Helicopter’ money’ in order to muddy the waters. (?)
If helicopter money is bad and GND is helicopter money ergo GND is bad. Job done. (?)
You cynic!
Shouldn’t devotees of Milton Friedman like the Telegraph be forced to weaar sackcloth and ashes and issue grovelling apologies for being malevlolently wrong for decades when they propose this?
It sounds like a crude form of Keynesianism to me, something they have vehemently opposed. Is the Telegraph tacitly agreeing with the ECB call to boost Government spending? I agree with your criticism that it is poorly targetted. A green new deal and putting money in the pockets of those who need ti would be far better. But it could stimulate the economy, albeit more the economy that produces the imports.
Or is the right wing view now that printing money is OK, but only in order to facilitate the election of right wing leaderrs like Trump and Johnson?
The last may well be it
It’s a typical Neo-lib one way street isn’t it? There is no mention of the cooling effect of taxes or what sector of the economy investment could be targeted at (hint: where we need growth as in green technology etc.).
And once say Johnson and Farage are in power, then they can claim that they have over spent and we need to tighten our belts again so in comes another round of austerity.
There is no imagination at all – just the rigid ‘certainty’ of orthodoxy, like a stuck record.
@PSR, I’m not so sure about your conclusion. Surely someone must ask them where they found the magic money tree? Why are we now undoing 10 years of austerity? Ergo, it was never needed.
But overarching all the above, this shower has such a proven record of outrageous lies who believes for one moment any of this will happen? It is simply electioneering.
As for taxes, we are assured that after Brexit it will be a case of low, low low taxes!
What’s not to like(?).
Yes……..
I heard a soundbite from Jonson today talking about his vision for the future. He sees a high wage, high growth, low tax economy supported by the best infrastructure in the world. No doubt the rest of the speech included stuff about how great we are and all the magical innovations that are just around the Brexit corner…..I had to stop listening at that point.
Helicopter money, is negative tax and any other nonsense that the muppets come up with to try and address the falling demand created by their economic race to the bottom. It’s just more short termism, which is pretty much what neoliberalism has become. But chasing growth is short term as well.
I don’t think the concept of a boost is wrong but it has to be around the long term well being of people. I kind of think that maintaining an ecological niche that continues to support human life is priority number one in the well being heirarchy.
Ian
Who knows what they will do?
Lie? Yes, maybe. Their leader is manifestly untrustworthy and has ‘previous’.
But they will surely mind, spend upfront and then like the Gods they like to be, take it all away again under some false logic later. People will have to feel that things are not as bad they were told – at least initially. That is until the right election result is delivered of course.
The Tories are telling people that they can afford all this because they have saved up for it because of austerity, because of peoples’ sacrifices.. You do realise that don’t you? It’s one of those unicorn stories that the neo-libs are so good at – wishful thinking.
Aaaaaahhhhhh. All is good with the world (please don’t wake me BTW).
[…] Cross-posted from Tax Research UK […]
I don’t think there’s any record of Friedman ever supporting its use as policy though. He merely used it to explain what he believed would be the effects on prices of increasing the money supply.