They Cheer, Little Realising they are Cheering Their Own Failure
Why didn’t the Irish media report this comment by the Minister for Public Expenditure and Reform?
‘Today I am announcing further reductions in Public Service numbers. I expect this reduction to reduce consumer spending by over €1.2 billion, to cut employment by nearly 25,000, and to remove about €2.3 billion out of the domestic economy. Through all this pain I am hoping to reduce the deficit by 0.3 percent of GDP. As the Government needs to reduce the deficit by 7 percent, we are hoping that this will make a small contribution.’
Ok, the Minister didn’t say that directly (he did say the first line). But if he had used the ESRI measurements, he could and should have laid out the terrible economic carnage the plans to cut public sector employment will inflict on us. If we had vigilant economic journalists they could and should have been queried the Minister about this at the press conference. What impact will these measures have? How much does the Government expect to ‘save’ when lost revenue and higher unemployment costs are factored in?
But he didn’t. And we don’t have that kind of vigilant economic journalism. So we have a Government patting itself on the back for cutting jobs out of the economy. We have a set of proposals that will do considerable damage to the economy and have little benefit in terms of deficit reduction. You don’t have to go through the tables in the ESRI paper to measure all this; it’s just common sense.
You have anywhere between 20,000 and 30,000 people entering the labour market every year from schools and universities. Then you have all those people on the dole queues trying to get a job. The economy has to generate a lot of jobs each year just to stand still. It has to generate even more jobs to start making a dent in the unemployment figures.
In this mix we have private sector employers struggling to generate jobs. So what does the Government do? It goes to the largest employer in the state (itself) and cuts the number of jobs even further.
So, now you have more people chasing fewer jobs in the economy.
When you factor in the lower employment levels - as the largest employer in the state is shedding more jobs - you have lower growth. And all that money the Government purports to save by reducing the public sector payroll is eaten up by lost tax revenue, higher unemployment costs and a lower consumer economy. At the end of the day, the reduction in the deficit is minimal.
It reminds me of the scene where Homer pursues another one of his get-rich-quick schemes by buying bacon rashers, frying them, feeding the rashers to the dog and then selling the left-over grease to grease recyclers.
Grease Purchaser: Four pounds of grease… that comes to… sixty-three cents.
Homer Simpson: Woo-hoo!
Bart Simpson: Dad, all that bacon cost twenty-seven dollars.
Homer Simpson: Yeah, but your mom paid for that!
Bart Simpson: But doesn’t she get her money from you?
Homer Simpson: And I get my money from grease! What’s the problem?
When the Government finishes carving up of the public sector and finds the deficit hasn’t really fallen much at all, we will know what has happened.
The Government just pulled off another Homer.
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Comment by: Jonathan
Nov 18th 2011 at 13:11
I’m not an economist, and I’m probably not pointing out anything that hasn’t been written better than others, but I have some thoughts on these public sector cuts and the VAT increase (being one of the low-paid private sector workers that will see his living standards destroyed by the next four-plus years of “austerity”). What both of these are is more evidence of is the true purpose of aforementioned austerity. Our domestic economy is collapsing because large amounts of people, like me, have little or no disposable income to spend, so now they’re going to make goods more expensive and cut the amount of people spending? No: the true purpose of austerity has nothing to do with fixing the economy, but is a full-scale assault on the living conditions of the poor and low-paid, designed to allow them to be exploited with greater ease.
Since this crisis began, this has taken the form of a three-pronged attack:
firstly on the public sector (where pay and conditions tend to be better than the private sector, and also linked with a neo-liberal contempt for anything that’s not run for a profit by Homo Entrepeneurius (perhaps a paper could be written on the Irish obsession with this particular beast, seen by many as the pinnacle of evolution, yet who seems strangely incapable of acting without government support and contacts (like “businessman” Sean Gallagher));
secondly on the trade unions (for obvious reasons);
and thirdly on welfare (continual stories about welfare fraud and spongers, and references to our “generous” welfare system made without any back-up statistics by people earning many multiples of the minimum wage). This is not to say that there are not problems in all these areas, but that’s not what austerity is about.
The end goal of austerity is to create an army of desperate, impoverished modern-day serfs who’ll be willing to work for practically nothing so that their employers can pocket the surplus as profits. Obviously this will take some time, but as long as the crisis is kept going (and we’re looking at a decade-long crisis at least, from 2008-2018) the government can blame everything on the Troika. This is a good reason to continue paying bondholders, for one thing. I just wish the powers-that-be, and their cheerleaders in the media, would admit this fact, and allow their callousness, greed, and contempt for humanity to be out in the open for all to see.
I think that what both unions and others need to do is get that fact out there by whatever tools at their disposal, and keep repeating and repeating it so that as many people as possible outside the media bubble hear it (making up an easy-to-digest pamphlet that can be circulated, or something like that…) Or something like that. Keep up the good work, Michael!
Comment by: Donagh Brennan
Nov 18th 2011 at 13:11
You are absolutely right about the agenda behind austerity, but it’s happening already
http://www.irishleftreview.org/2011/10/26/relation-profits-austerity/
http://www.irishleftreview.org/2011/11/16/profits-austerity-industrialised-economies/
VAT is designed to derive revenue from the poorest. In Ireland, returns from VAT is dropping of course, but there is absolutely no move on taxing wealth. It’s basic class war.
Comment by: Homer
Nov 18th 2011 at 16:11
Aren’t all these “job cuts” supposed to be by attrition (retiring public-sector employees)? So they wouldn’t be going on the dole.
Comment by: Homer
Nov 18th 2011 at 16:11
In fact, I might be a very stupid person. D’oh!
Comment by: Michael Taft
Nov 18th 2011 at 20:11
Homer - if the total amount of employment falls and there’s a continued stream of net new labour market entrants, this will either result in higher unemployment, emigration or people falling out of the labour force (i.e. giving up searching for work).
Take for instance an economy of a 1000 people with 50 people entering the labour market each year. If 50 people leave employment each year (retirement, etc.) and these vacancies are filled by the incoming labour market entrants either directly or indirectly, then there is no excess labour. However, if 50 people leave employment and these vacancies are not filled, there is an excess of 50 people.
This excess is unemployment (if its not emigration or giving up looking for work).
Comment by: vincent wood
Nov 18th 2011 at 23:11
Perfect Thatcherism. Perhaps better than she could ever have hoped for. The logic of the economic argument put forward here isn’t addressed by Noonan or the Troika or much of the political establishment because to accept that logic would call a halt to the further erosion of government/state/democratic involvement in the provision of services.
Labour have bought into all of this with a shrug of the shoulders. Are they even claiming to be fighting the corner of ordinary folk or holding back the excesses of Fine Gael?
Comment by: The Real Homer
Nov 24th 2011 at 11:11
Me thinks Homer’s comments have been edited by Herr Moderator. Tut-tut. A new low – impersonating Homer. Why don’t you choose your own character? Flanders perhaps?