Time to Start Working on Plan B
The recent Central Bank quarterly report confirms (as if we needed confirmation) that the economy remains in slow bleed mode. That they have revised downwards key domestic indicators is in keeping with other forecasters. We have an economy that is spinning its wheels in a deflationary trough, with no sign of relief in the short-term.
If the Central Bank projections hold, the Government is on course to miss almost all its economic targets – only a few weeks after publishing its projections.
Looking at the domestic economy we find that GNP will grow – but according to the Central Bank by only half the rate the Government is hoping for. Consumer spending, Government consumption (spending on public services) and investment – the Central Bank is more pessimistic.
On employment, the Central Bank is projecting growth for the first time since 2008 – but only a marginal 4,000 jobs increase. The Government is hoping it will be more than twice that at 9,000 jobs. As a consequence the Central Bank is projecting a marginally higher unemployment rate: 13.9 percent.
The only thing that is keeping the economy afloat, statistically anyway, is exports – which both project to grow by over 6 percent. But as discussed elsewhere, this will have a limited knock-on effect on the domestic economy as long as foreign multi-nationals drive the exports.
Recent data emerging doesn’t paint an encouraging picture. The NCB Purchasing Managers’ Index for the manufacturing sector showed a fall for the second month running. This is part of a general fall in manufacturing activity, both in Europe and globally. This is not unexpected. The increase in manufacturing experienced here and abroad in the first half of this year was always likely to ease off.
Insolvencies in Ireland are still growing apace. . Insolvencyjournal.ie recorded a six percent increase in business closures in the seven months to July over last year. Again, this is not surprising with the Retail Sales Index falling almost every month this year.
And all this is likely to continue with the Central Bank projecting that the economy will be remain in a domestic-demand recession next year - with consumer spending, Government consumption, and investment remaining south of zero.
Let’s be clear – this grinding down of the economy is not due to external demand. If the world didn’t want to buy our goods and services it would be difficult to turn around in the short-term. However, external demand is healthy, exports are rising. It is not external demand that is dragging the economy down.
It is domestic demand. And this is where austerity policies are doing their greatest damage – falling wages, failing businesses, rising unemployment and the resulting sluggishness in public finances; all this is being exacerbated by a systemic bank failure to support the local economy.
There is some good news in all this. The attacks on domestic demand via austerity policies are government-manufactured. They can be undone. A new course can be charted; yes, there is limited room for manoeuvre given the EU-IMF deal – but manoeuvre room still exists.
What is required, however, is a government that has an extremely high level of fiscal competence.
What is required is for the current government to admit that the policies of Fianna Fail should no longer be continued.
What is required is for Ministers to work on a Plan B over the rest of the summer.
Discussion
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Comment by: Robert
Aug 6th 2011 at 20:08
Of course the problem is, is that we dont really produce much ’stuff’ except maybe for cheese and milk and some beef. The USA has just sufferd the humiliation of its Triple AAA rating being downgraded, and it is basically because the US like the UK and Ireland, we have for the past twenty years since Thatcher & Reagan not really produced any ’stuff’ other than houses which consecutive givernments ‘banked’ upon to keep the so-called ‘free-market’ going. What they did’nt figure and have yet to figure is that treating human shelter as commoditity rather like one might a washing machine is not only morally questionable (and in effect continues the 17th Cent. philosopher John Locke’s political philosphy on property, a philosophy that he designed to protect his personal investment in slavery (as property)at the time), it is fundementally flawed. The ‘free-market’ and I use the term as Adam Smith saw it, (I think?) a ‘free-market’ that if left to its own devices, would have allowed the banks to fail because they where corrupted (in the sense as an electronic computer chip might become corrupted by an external force or virus)and this free-arket would have by now rid itself of all the government influenced corruption that has infected the market and so the virus continues to fester.
Really we are not suffering from economic corruption, we are suffering from corrupted politics, a politics that is far removed from Aristotle’s vision of ‘The Good’ as shaped by those of virtue who are aiming for the good rather than personal unneccessary gain. Of course we no longer think philiosophically about this knd of thing any more, rather we live in the so-called scientific age, were focus groups and pollsters dominate. The tradgedy is that human suffering around a worry how to hold on to our shelter is the one significant worry that now permeates through Irish society. In this respect if we could let go of this worry, (and this is were government could really deliver ‘the good’) then maybe the stuff we need to start producing again is the stuf of stories and music and poetry and scholastics. It is then that we might clamber out of the mire and look to the paths that will carry us across the beautiful bog-lands of Ireland and into a better history. After all the Irish housing bubble is a tragic history, will we learn from it? I’m not so sure.
Cheers
Comment by: Robert
Aug 7th 2011 at 10:08
Apoogies for my lack of editing the above, the perils of my last £1 running out in an internet cafe.
Anyway what I was trying to say:
1. We cannot depend on current governments to put human rights (including our right to shelter) before the right to property and its resultant capitial. In otherwords the leverage that property related capital imposes has become too powerful and therfore until a new political philsophy is invented to counter-act and even in time, cancel out this power we remain enslaved.
2. We exist under ‘The Tyranny of Economics’. and much like Paul Feyerabend argues in his book ‘The Tyranny of Science’ where he shows that Science and Physics is a wasteland of failed theories and predictions all accepted with-out question until proven wrong and after the harm has been done, economic predictionss has become a a dogma that more often than not in terms of its predictions is doing so much more harm than good.
That said Ireland can take shelter for the time being under the difficulties that Italy and Spain and the USa is facing.Its just a shame that the ordinary families of Ireland have to bear an unjust share of the pai.n