Monthly Archives For October 2013

The War on Youth: The Pickpocket Budget

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Don’t be under any illusions:  there is an economic war being waged against young people.  It is being fought on a number of fronts:  education, social protection, labour market and even cultural. The fact that one-in-three children suffer multiple deprivation experiences shows the level of casualties.  It is the ultimate victimisation:  if you want to buy into that ‘we all partied’ line, knock yourself out; but how can this possibly apply to the young?  Young people are no longer being raised to be the subjects of tomorrow; today, they are being turned into mere objects.

A whole book could be written about the war on youth.  In this and a subsequent post I just want to highlight a couple of things.  They may not be the most important battlefields but they are indicative of a mind-set that, on the one hand, claims to help, but actually targets.

Take the interacting stories presented by the Government:  the Youth Guarantee and the cutting of social protection payments for those under 26 (punctuated by the one of the more hilarious rationales for any spending cut – the Tainaste’s claim that youth unemployment payments were actually not cut).

The Youth Guarantee is potentially an extremely positive development.  In the Government’s formulation a young person would be offered a job, work experience, apprenticeship, or training after eight months of being unemployed (in the EU Commission’s formulation, the offer would be made within four months of leaving education or becoming unemployed).  The Government has set aside €14 million for additional job training places.  Mary Lou McDonald, TD pointed out that the Government announced only 4,500 additional places (and further pointed out that last year the Government promised 10,000 places and only provided 5,000).

The 4,500 additional places – if they emerge – must be compared to the overall level of youth not in employment, education or training (NEET).   The actual number is hard to come (if anyone has one I’d be grateful).  We know that there are nearly 65,000 youth unemployed, of whom 22,000 have been unemployed for more than one year.  In SIPTU Youth’s analysis, 52.7 percent of NEETs are unemployed.  Extrapolating from these numbers (estimating the number unemployed for over eight months which is not a category in the CSO release), I would suggest that the number of young people that could avail of the Government’s scheme would be 74,000 – admittedly, a back of the calculator estimate.

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Budget 2014 Changes in Irish Corporation Tax Regime is No Change At All

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I have been looking for detail on the proposed changed in the corporate tax regime announced by Michael Noonan in the budget. So far I can’t find anything, but this is the clearest so far:

“Under current Irish tax law, Irish registered companies that are managed and controlled from other jurisdictions, are not tax resident here. Such companies, resident here but controlled and managed from offshore locations such as Bermuda and the Cayman Islands, form part of the international tax structures of major multinationals such as Google and Microsoft. Although they may pay no corporation tax, they are not “stateless” in terms of tax residency and are outside the scope of the measures proposed by Mr Noonan. A spokesman for Mr Noonan’s department confirmed this was the case.”

Both Google and Microsoft, and of course Apple use secretarial services provided in the offices of firms of Irish solicitors to create subsidiaries that are ‘resident’ or incorporated in Ireland, but are not ‘tax resident’ here. This is because these subsidiaries, the Irish legal flim-flam goes, are ‘managed and controlled’ in the offices of firms of solicitors in Bermuda or the British Virgin Islands. These subsidiaries, such as Google Ireland Holdings Ltd (Bermuda) are nothing more than a post box address in a Bermuda high street, and the only managing and controlling that goes on is through the secretarial services (opening letters) provided by a busy but small staffed solicitor’s office.

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’50 Cuts too Far’ will cost jobs, postpone recovery and cause increased hardship

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This was originally published on Unite the Union Irish Region blog on the 17th of October

Unite issues list of Budget 2014 cuts

As the dust settles on Budget 2014, trade union Unite has issued a list of what it terms ’50 Cuts too Far’ which, taken together, will take more money out of households and communities.

“The list of cuts compiled by Unite is by no means exhaustive:  many ‘below-the-radar’ cuts will only become apparent in the coming weeks and months, as has been the case with previous austerity Budgets”, according to Regional Secretary Jimmy Kelly.

“What this list does show is that, once again, low and middle income families have been targeted, and many will suffer the cumulative effect of cuts in successive budgets – and multiple cuts in this budget.

“For example, someone who is made redundant will no longer be able to avail of top-slicing relief on a redundancy lump sum – and they will also not be able to get Mortgage Interest Supplement.  If they have a large family, their Child Benefit will be cut – and they will also be liable for increased prescription fees and other increased charges, depending on their individual family circumstances.

“And the final irony is that as a result of this Budget, which Unite estimates will cost something in the region of 25,000 jobs, they will find it that much more difficult to get employment again.

“The tragedy of Budget 2014 is that there were alternatives – alternatives which would have improved social outcomes and economic growth”, Jimmy Kelly concluded.

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It’s the Tax-Break Way or No Way at All

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It was a listless budget, a thin budget, a budget without narrative or direction, without reform or innovation.  And, of course, it was another austerity budget which took from the economy and did not give.  Or did it?  The Irish Times headline says:

Tough budget tempered by €500m jobs stimulus plan

Did I miss something?  I went in search of this job stimulus plan – the programmes, the number of jobs that would be created, etc.  I found it, sort of – in this little infograph produced by the Department of Finance.  There is a rake of proposals to create jobs – they’re called tax breaks.  The Government estimates that these tax breaks will cost the state€500 million.

Tax breaks are an opaque and uncertain way to ‘stimulate’ job creation.  It depends on the take-up, the translation into employment and a calculation of the cost of the relief versus the benefit of increased economic activity.   I fear that on past practice, we won’t know if these are successful and, indeed, if we just burned up money to no effect.

Let’s take a look at a few ‘job stimulus’ tax breaks:

Home Renovation Incentive: this will provide a tax credit to homeowners who carry out home renovation. The credit will be calculated at a rate of 13.5% on expenditure over €5,000 up to a maximum of €30,000.  A nice little touch is that the credit will only be provided for registered tax-compliance builders, to combat the shadow economy.  So if you do €20,000 of works on your house, you can get €2,600 back from the state in the form of a tax credit.

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Left Forum Debate: Does Ireland Need a New Left Party? Sat. Nov 2nd 2013 @ Teacher’s Club

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The proceedings begin at 10:30 am, and will be followed by an afternoon of open workshops.

The intention of the Left Forum is to provide an opportunity for a productive dialogue across the left, and as far as it is possible, to facilitate coordination of left-activists and campaign groups, so as to strengthen the worker’s movement in Ireland generally.

All left-organisations, left-campaign groups, independent left-activists and all others that are interested in facilitating the development of the workers’ movement are invited to participate. Please join us at the Teacher’s Club on November 2 to take part in this important debate.

Left_forum_large

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Don’t Just Read the Label, Look inside the Tin

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So, Fine Gael has caved in to Labour.  There will now be only €2.5 billion in fiscal adjustments (read: austerity), not €3.1 billion.  A victory for the junior partner or a necessary concession given the general austerity fatigue; regardless the reason, less cuts and taxes.  But how can we be sure?  Given what has happened over the last two budgets, I would urge caution.

Measuring a Government’s budgetary package used to be relatively straight-forward.  You just added up the tax and the spending measures (whether they were increases or cuts).  They can be parsed in two ways – the tax increases and cuts that hit in the calendar year and the total full-year impact.  The difference between the two is that in many cases, a tax increase or a spending cut may come in during the year, not at the beginning; this means that it may not be fully felt in the first year.

That’s why it is best to focus on the full-year yield of budgetary measures.  Here, I will focus on current spending cuts.  In Budgets 2012 and 2013, the Government claimed that it was cutting current expenditure by approximately €1.5 billion in each – or €3 billion over the two years.  How does this compare with what the Government actually published in the Expenditure Reports for each budget?

CSC

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October Issue of Socialist Voice is Out Now

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he October issue of Socialist Voice is out now.   It can also be viewed online at :
http://www.communistpartyofireland.ie/sv/SV-106.pdf

Contents

  1. Debt is a means of attacking your rights and wages [EMC]
  2. Ireland’s housing crisis worsens [MA]
  3. How austerity is working [PD]
  4. Haass unlikely to succeed [TMK]
  5. Norn Ireland as seen from Britland [NW]
  6. Capitalist growth and environmental crisis [NL]
  7. A true son of the Vietnamese people
  8. There is an alternative (Part 1)[EON]
  9. US meddling led to Westgate massacre [TMS]
  10. A century of working-class life [TR]
  11. A day in the life of a bookshop [PD]
  12. Guantánamo poems [LC, JF]
  13. Who would be a whistle-blower? [RNC]

Debt is a means of attacking your rights and wages
The system is determined to overcome its crisis by continuing to reduce workers’ wages and living standards, to undo the welfare provisions won by workers over a century of hard, bitter struggles. The establishment—both the EU and the main Irish establishment parties—continue to argue that we are living beyond our means and that we need to pay the debt and bring government spending under control.

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From Alpha to Omega Podcast: A Model Economist

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Many thank to Tom O'Brien for allowing us to post the interviews from his podcast series, From Alpha to Omega, as they appear. From Alpha to Omega provides regular in-depth interviews with leading figures in the fields of Economics, Peak Oil, Democracy, Politics, Science, Mathematics, Philosophy, Complex Systems, Agnosticism, Permaculture, Collapse, and the Environment.

Recent interviews have included those with Marxist economists Alan Freeman, Michael Roberts, Michael Perelman and Andrew Kliman. We have already featured the interview with L.Randall Wray, on Modern Monetary Theory.

We will post each interview on the weekend that it appears on From Alpha to Omega – usually every two to three weeks. You can check out the From Alpha to Omega archive here to listen back to the previous 39 interviews that Tom has conducted over the last two years.

#40: A Model Economist

This week the interview is with Professor Matheus Grasselli. Matheus is the Deputy Director of the Fields Institute for Research in Mathematical Sciences, and an associate professor at McMaster University, where he is the co-director of PhiMac, the Financial Mathematics Laboratory. He also writes a blog on Quantitative Finance for the Fields Institute, where he discusses his work, and thoughts on economic modelling, complexity theory, and probability.

Matheus has been working with Prof. Steve Keen to help give a mathematicians viewpoint on his ground-breaking monetary economic models of the capitalist system. We discuss the current state of neoclassical macroeconomic modelling, complexity and emergence, Wynn Godley and his stock-flow consistent models, Hyman Minsky and Ponzi finance, black swans and fragility, Bayesian vs Freqentist statistics, Poker, and Samuel Beckett.

You can check out his blog Quantitative Finance: Foundations and Applications here.

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A Few Referenda Ideas that Just Might Succeed

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As the Government does its post-mortem on the Seanad referendum, Switzerland is gearing up for a vote in November on a referendum that is truly reforming.  It’s called the 1:12 initiative. It proposes that monthly senior executive salaries cannot exceed 12 times the pay of the lowest paid in a firm.  And it proposes that this be put into law.  This is pretty heavy in a country which is home to major financial institutions and multi-nationals.

Imagine the impact here.  In the Bank of Ireland, the CEO Richie Boucher has a salary of €843,000 (no, that’s not a typo).  A bank clerk on starting pay is approximately €22,000.  Under this law one of two things would have to happen:  either Richie’s salary would have to fall by three-quarters – to €264,000 a year. Or the starting pay would have to rise to €70,250.  I leave you to decide which is more likely to happen, if either.

But there is more going on in Switzerland than just a pay ratio debate.  Earlier this year, the people voted on a referendum that put controls on executive pay and gave shareholders’ more rights over executive compensation.  There has been growing anger over excessive salaries and the bonus culture among Swiss companies.  The referendum passed overwhelmingly despite the fact that opposing business lobbies outspent the ‘yes’ side by 40-1.

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From The Republic of Confiscation

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After Seamus Heaney’s death, the Irish Times sought contributions from its online readers about what Heaney meant to them. One reader recounted meeting him at a reading at Harvard:

After the reading, I joined the throng that inched its way toward him bearing my copy of Opened Ground. When I finally reached him, to my surprise he looked me over and asked, “Ah, now. what do you do.” Flabbergasted, I told him I was a Boston Public School teacher. His response: “Ah, now, that’s a real job.” He scrawled the words, “Keep going” in my book.

Heaney himself, of course, was a teacher. He trained as a teacher at St Joseph’s Teacher Training College in Belfast, and taught at a secondary intermediate, St Thomas’s, in Ballymurphy, West Belfast. He then trained other teachers at St Joseph’s, and when he moved south, got a job teaching trainees at Carysfort College. His wife was a teacher too, as were his sister and brother.

By becoming a teacher, Heaney was taking advantage of possibilities created by the 1947 Education Act in Northern Ireland. In his superb book of interviews,Stepping Stones, Heaney recognised that neither he nor his brothers and sisters would have gone to university were it not “thanks to the system put in place by that Labour government in Britain.”

This isn’t strictly true: the 1947 Education Act, though introduced in Northern Ireland under a Labour government in Britain, was modelled on the 1944 Education Act in England, brought in by R. A. Butler under a Conservative government. However, it’s certainly true that prospects for disadvantaged young people in Northern Ireland in the 1950s were shaped for the better by the building of the Welfare State that occurred under the Attlee government elected by landslide in 1945, so the gratitude isn’t misplaced.

Nonetheless, Stepping Stones reveals Heaney’s unease at the inequalities that the new system imposed: between those who went on to a grammar school education and those who didn’t. In recalling his time spent teaching at St Thomas’s, a school for the supposedly “non-academic”, he saw how “instead of a school where equal attention was paid to all abilities, there was this favoured upper stream and then the great non-academic flow-through. My job, for the year I was in the school, was to teach English at first-year and fourth-year levels, to two of the exam-oriented classes. And I had a PE class with a group of really low-ability first years, 1G, for God’s sake, in a ranking that began with 1A.”

He said the “school was attempting to inculcate a regime of respectability and conformity, a kind of middle-class boarding-school style, but the home culture and the street culture of working-class Belfast was very different”, and recognised “disadvantaged homes and impoverished conditions generally as a barrier to growth and self-realization”.

For all its drawbacks and inequalities, the education system in the North of Ireland for working class children, sustained by gains won by the labour movement in Britain, compared favourably to what was available south of the border.

It wasn’t until 1966, the fiftieth anniversary of the Easter Rising, that free secondary education was formally introduced in the Republic. But despite its constitutional claim to be a democratic state, the Irish State continues to fund teaching at exclusive private schools. In Enough is Enough, Fintan O’Toole highlights the fact that a fifth of all university students had paid fees at second level in 2008, and that 43% of students at UCD came from either fee-paying or grind schools. The attitude of the current government to education in line with democratic principles can be glimpsed in the fact that the 2012 Finance Bill allowed high earners to write off private school fees of up to €5,000.

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Guests of Another Nation

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Guests of Another Nation, the independent documentary by John Fleming and Mark Stewart, is now available on YouTube.

Shot over six short, dark and bloody cold days in December 1987 this half hour film, which aired on RTE in August 1989, looks at the young Irish in London in the 1980s.

Over its 27 minutes, the film locates various subjects as anything but the successful role models the Irish media at the time was selling as part of a need to be positive about emigration. Arguably far more accurately, it paints the Irish migrant in London more as a lost and lonely outsider driven by something other than economics. The tone is wistful, melancholic and unsettled. A time capsule in whose favour Ireland has once more unfortunately turned.

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How Many Thousands of Jobs Will Be Destroyed in Budget 2014?

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In the run-up to the budget all the talk is of how many jobs will be destroyed as a result of Government measures.  Well, not really.  But it should be.  Ministers and Government backbenchers are fond of quoting one measurement of employment that suggests 30,000 jobs were created in the last year.  Never mind that this comes with so many caveats and represents ‘data-dredging’ (searching for one or two stats that puts you in a good light regardless of the context).  What they never, ever mention is that their austerity measures are actually destroying thousands of jobs.

No one doubts that spending cuts and tax increases lowers economic growth; this in turn lowers employment.  The only question is how many jobs are being lost.  I will summarise the estimates from the ESRI and NERI, based on an adjustment of €1 billion (e.g. a €1 billion cut in social protection payments, a €1 billion increase in property tax, etc.).

ERSI_employment

Not surprising, all measures destroy jobs.  The biggest culprit is reducing public sector numbers (this helps explain why cutting public sector numbers actually increases the debt).  The second biggest negative impact is investment.  The two adjustments that have the least impact on employment are carbon and property tax.  There are a few points to bear in mind:

First, the projection for investment is an under-estimate.  The ESRI does not include the ‘supply-side’ impact (that is, the loss in employment from not using the asset created by the investment – a road, building, telecommunication network, etc.).  According to the ESRI, this under-estimate is ‘significant’.

Second, income tax has the third most negative impact.  These estimates are an average of the impact over six years. The impact varies over time.  For instance, increasing income tax has only a negligible impact in the first year it is introduced (reduces employment by 1,860).   However, the deflationary impact accelerates over the years so that by the fifth year the impact is nearly five times that amount.  I have used the average.

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Five Years On – The Media’s Role in Ireland’s Financial Fall

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With the five-year anniversary of the nationalising of the Irish banks having just passed us, one would think that at this stage we would have some answers. One would be wrong. Of course, much has been written about the topic in the years since. However, as much as we and the media enjoy blaming the elites of the world for what happened, the media also had a large role to play in the inflating the property bubble which has since burst and the consequences of which have hobbled the country. They toed the party line regarding property prices, and as a result, played an important propagandising role in the country. Whilst over the previous week there have been numerous articles written about the bank guarantee and the resulting economic downfall, as far as I am aware, nothing has been said about the media’s culpability. This is an important omission, but not entirely unsurprising.

Nevertheless, one Irish-based academic has looked at this particular issue. In April of this year, Julien Mercille, of the School of Geography, Planning & Environmental Policy in University College Dublin (UCD), published a paper entitled “The Role of the Media in Sustaining Ireland’s Housing Bubble”. The paper, which got a very limited amount of publicity at the time of its publication, goes into great detail regarding the functioning of the economy prior to the bank guarantee and the media’s role in helping to inflate and sustain the property bubble. As early as 1998, economist David McWilliams was writing about the dangers of a property bubble emerging in Ireland as all of the signs pointed to one. He wrote that, “general credit in the economy is up more than 20 per cent in 1997 alone. A quick glance at property prices suggests that we are definitely entering asset-price bubble territory”. However, such viewpoints were rarely heard in the national media and reasons for this are simple: The centralisation of power, overlapping interests, and clientelism/cronyism. We can see this when we look at the composition of those at the top of the various private and state-owned media in Ireland.

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