Friday, 24 February 2012

Stimulus Plans for Beginners

One of the most asked questions in the dull but important study of political economics is “How does a stimulus plan work?” Here are two humorous stories that should help answer that question.

The Three Contractors

Three contractors are bidding to fix a broken fence at the Houses of Parliament.
One is from Surrey, another is from Kent, and the third is from Essex. All three go with a Parliament official to examine the fence.

The Surrey contractor takes out a tape measure and does some measuring, then works some figures with a pencil. "Well," he says, "I figure the job will run about £900: £400 for materials, £400 for my crew and £100 profit for me."

The Kent contractor also does some measuring and figuring, then says, "I can do this job for £700: £300 for materials, £300 for my crew and £100 profit for me."

The Essex contractor doesn't measure or figure, but leans over to the Parliament official and whispers, "£2,700." The official, incredulous, says, "You didn't even measure like the other guys! How did you come up with such a high figure?"

The Essex contractor whispers back, "£1000 for me, £1000 for you, and we hire the guy from Kent to fix the fence." "Done!" replies the government official.
And that,  is how the a stimulus plan will work if Politicians have a hand in the matter.

Stimulus à la EU

It is a slow day in a dusty little Italian town. The rain is beating down and the streets are deserted.
Times are tough, everybody is in debt, and everybody lives on credit.

On this particular day a rich tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.

The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.

The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the bar.

The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit.

The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.

The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything. 
At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.
 No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.

And that, is how the EU stimulus package works.

1 comment:

  1. Great stories. There is an error in the second story, however. Everyone produced something which is why they were in debt. The fact that no one kept the hundred Euro is the reality of our monetary system, anyway.