Thursday, 18 November 2021

Helicopter Money

The big excitement in our house this week is the arrival of my £100 pre-paid Mastercard. I’ve been given this by the Northern Ireland administration. It isn’t a prize, but a gift. And all residents over 18 are receiving it. The card can be used in any NI shop. But the money must be spent by 14 December. T is looking at my card enviously. She applied for her card a week or so before I did, but hers still hasn’t arrived. Now I have to decide what to do with the money. Have you spent your helicopter money yet? If so, what on?

It’s not an easy decision. There are so many options. A slap up meal in a posh restaurant? Or basic foodstuffs? Or something for the house? Or something from my local bike shop? Or do I donate it to charity? To help my decision making, some shops will be happy to exchange it for a store-card with a much longer expiry date and even 10% or 20% on top. There are some exclusions: you can’t exchange the card for cash, or spend it in a bookies, or on your mortgage, or for paying a fine, or on car tax and insurance.

There is a long history of giving money direct to individuals to stimulate the economy. This is often done in developing countries, especially those with fragile systems of administration. The small amounts of money that are given directly to the poor get spent in local markets and this has a multiplier effect. I was on the Board of Concern Worldwide for many years and oversaw a number of these schemes. They were a very effective way of helping the poorest of the poor.

The term ‘helicopter money’ was coined by Milton Friedman (Margaret Thatcher’s favourite economist), as if the money was being thrown out of a helicopter to the citizens below. But in some war torn states, this is how it might actually be done. I recall that during the Iraq war, the Americans were paying certain tribes not to fight against them. Shades of Catch 22.

I’m still pondering what to spend my helicopter money on. For a treat, or on necessities? Maybe this year, for once, I might be buying my Christmas presents early. But I’d better make my mind up soon. Before T gets her hands on it.


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