Earlier this year, Finland broached the idea of a direct payments to consumers as a means to help stimulate their economy. Known in the mainstream as ‘helicopter money’ after former Fed Chairman Ben Bernanke declared he would do anything including dropping money from a helicopter to stimulate growth, this scheme has also been suggested in country’s such as Switzerland and Japan.
And while the idea went on the back burner over the past several months, a department in the Finnish government is now resurrecting the idea of helicopter money, and to provide cash payments directly to the people.
Finland’s health and social affairs ministry wants to try out a basic income scheme to test the impact of unconditional cash payments on work incentives.
The experiment aims to show if the measure can simplify the welfare benefits system and lower unemployment in the country.
“The primary goal of the basic income experiment is related to promoting employment,” the ministry said.
As part of the testing, which will begin next year, 2,000 randomly selected working-age recipients of unemployment benefit will receive a monthly tax free income of €560 instead of their current payment.
The government proposed the project at the beginning of the year with the idea Finland explored the possibility of introducing the basic income nationwide, rather than locally.
“The model that is currently being circulated for comments is considerably less ambitious,” said Olli Kangas, the head of research at the Social Insurance Institution of Finland (Kela), which is responsible for running the experiment. – Russia Today
Finland and most other Northern European economies already have one of the largest welfare systems in the world, where virtual cradle to grave insurance is provided to the people, but at a cost of extremely high tax rates. This means that most individuals have all of their necessities taken care of, but have little discretionary income to support businesses that sell products and services not covered in the government’s centralized planning.
Additionally, the tremendous drop in oil prices have caused these economies to have to borrow and expand their debt since their primary source of income to pay for all of these ‘free’ services is well below budgetary requirements.
Any Economics 101 student surely knows that when you expand a nation’s money supply, the natural reaction is price inflation for all goods and services in that nation’s general economy. But it really speaks to the desperation all central banks are incurring today, where their eight years of zero and negative interest rates policies have only made situations far worse, rather than better.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.