July 7th: The Recession Diaries
In the current economic climate it’s hard to know what is more depressing: the fact of economic recession, the onslaught of the Right through all the channels at their disposal, the unsettling quiescence of the Left, or the besieging of the trade union movement. It’s all coming down the pipe so fast on so many fronts, its difficult to know which uttered untruth to dissect, which unstated truth to promulgate. That’s the problem with recession times - it spins one’s head and you lose your intellectual compass.
These times requires a different kind of critique. Heretofore, I’ve tended to investigate a subject-matter at some depth (or tried to). That’s fine for one kind of climate. But it’s storming now and we have to run between the showers to keep somewhat dry. Therefore, I am starting a diary - a recession diary. To keep up with the rapid-fire events and commentary - as rapid as the downturn - I will produce a running review, sacrificing depth for breadth. I will continue to produce more sustained posts but for now, to accommodate work commitments and the nature of recession, I will keep to brief posts which will still, hopefully, be of some interest.
After all, this is recession time - a lot of people won’t get out of this thriving.
Afternoon
Some people ask me - why is everything collapsing? Okay - so there aren’t a whole lot of houses being built. Can that possibly explain this sudden drop? The last thing they want is a history of this and an extended elaboration of all those other thats. They understandably want a brief, all-encompassing answer that can point the way to some kind of solution. Life is too short to be subjected to an economic history lesson. So this is what I say:
Between 1995 and 2001 our exports grew by over €72 billion. That was the core of the Celtic Tiger economy. And that’s when our Euros weren’t being picked clean by inflation. Between 2001 and 2007 our exports grew by only €39 billion. That’s less than half. And our Euros don’t go as far as they did. And there are a lot more people to support with that money.
Now, if their eyes don’t glaze over I can then go into how we squandered all that wealth from the 1990s (not in the way Fine Gael talks of squandering - they never opposed tax cut or property subsidies, they never argued for land price controls), and how we frittered it away in tax cuts, in property speculation, in buying up overseas property.
That, in essence, is the core: We either export or die. We either make and sell goods and services to sell abroad to pay for our living standards and our services - or we return to the fields. Or watch the dole queues expand. Or schedule more flights so people can get the hell out (the usual way we dealt with economic decline in the past).
So through these times we must hold fast to the goal of increasing export growth. Others will divert us with issues like cutting public expenditure, cutting taxes, cutting regulations, cutting wages, etc. etc. These issues must be faced head-on, but it must be in the context of arguing for greater export wealth. That is how the Left can turn this debate around - a debate we are already losing.
And the recession is only just starting.
After Tea-time Pints
Out for pints with a friend who treats Exchequer monthly returns like the Racing Post - forever checking the forms of the various revenue streams and then predicting the next monthly race. He tells me that on current trends we will have the lowest tax revenue as a percentage of GDP, which makes me nearly gag on my drink.
‘Not in Europe, surely. I mean, there’s Romania,’ I reply.
But he is adamant and when I get home I look up the numbers. He’s right - our tax revenue as a percentage of GDP is by far the lowest in the EU-27, lower than Romania, lower than the Slovak Republic, lower than even the US. Current and capital income is projected by the ESRI to come in at 25.6 per cent of the GDP (30.2 per cent for the post-repatriation GNP figures). The EU-15 average stands at over 45 per cent. We’d have to spend an extra €28 billion just to reach the EU average. We are so low that only Mexico among the OECD countries beats us to the absolute bottom.
Good grief. Does anyone really think we can have even a second-rate health system, or education system, or public transport system, never mind social protection, etc. on that level of tax revenue? Maybe so - David Quinn is on RTE’s Questions & Answers, calling for more tax cuts. The outriders of the neo-liberal command economy will not let social facts and economic necessity readjust their ideological myopia.
In all the commentary no one has raised this aspect: a modern, socially efficient and socially equitable economy needs a high level of public investment and services. But this can only be sustained by a reasonable level of taxation and expenditure. All we are treated to is a surfeit of commentary insisting on public expenditure cuts - whether of the trim and prune variety or the slash n’ burn school of lay-society-to-waste. After 10 years of boom we are mired in a low-wage, low-service, shoddy-infrastructure economy. And the only answer some of our esteemed commentators have is to make it worse.
And yet, and yet - general tax increases at this juncture would be tantamount to public expenditure cuts or pay freezes: they would reduce disposable income which in turn would reduce consumer spending and if that falls anymore then there’ll be more job losses, wage reductions, and downsizing in the consumer markets. And the vicious cycle spirals downwards. What a mess.
It’s getting late. I’m exhausted with all these desultory numbers. And it’s raining.
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