When we think of profits, we think of successful companies that employ people to produce goods and services that other people want to buy; for instance, the proverbial ‘widget’ factory. Ideally, a profitable company employs people on good wages and conditions, invests in expansion (to keep up those profits and increase market share), and pays a competitive return on capital.
With the onset of financialisation, financial companies have come to over-ride traditional markets such as industry. They don’t actually produce much, but they make a lot of money and with that comes political power to dominate decision-making in the economy. If you have any doubts about that just remember our own bubble, crash and bondholder rescue. The productive economy takes second place.
One measure of the extent to which financial institutions can dominate the productive economy is to compare profit levels between the two. In a productive economy, profits from non-financial companies should be strong. In a financialised economy, profits from financial institutions will be stronger.
Where does the Irish economy stand? With the financial boys and girls.
Yes, if you’re a financial company and you happen to be in Ireland, you’re in heaven. Even the UK, with the power of The City, doesn’t match Ireland in this measurement.
Yes, some people might say, but financial companies bring their own benefit to the economy. Oh? Not according to the latest Central Bank Quarterly Report – thanks to Ben (aka Conor McCabe) from Dublin Opinion for spotting this:
‘Financial sector developments, which are for the most part unrelated to the domestic economy, account for a significant portion of the rise in GNP. To the extent that these persist in contributing to growth in net factor income in the coming year, they would further support GNP growth unrelated to domestic consumption, investment or export activity.’
Ah, yes, they are in this economy but not of this economy.
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We’ve had some pretty brutal debates where evidence took a back seat to unsubstantiated assertion, misleading projections and just plain fabrications: public sector pay, social protection rates and fraud, taxation, government spending, deficit reduction and on and on. I didn’t think it could get any worse but that just shows what I know. For along came the claims on staffing levels in the Irish water services.
Monday morning we woke to claims that Irish Water was employing far more staff to run water services than was necessary – over twice as many. This would end up costing €2 billion which would be imposed on households through higher charges. This was due to ‘sweetheart’ deals between trade unions and the Government. Isn’t all this typical of a ‘state monopoly’ which will pay staff for doing nothing? By Monday lunchtime there was an avalanche of commentary – all condemning the latest manifestation of a bloated public sector.
There was only one problem with this debate; it wasn’t based on any evidence. And the final twist in this sorry story is that by Monday night the person who started all this buzz, who made the claim of over-staffing and €2 billion in additional costs – Dr. John Fitzgerald – admitted he was not sticking to his own figures. Oh, my.
Let’s go through a couple of numbers to show how irresponsible this day-long debate – which was wholly dependent on manufactured numbers – was.
How Many Numbers: the 1,700 Figures
The latest estimate is that there are approximately 4,278 water service employees, of which 80 percent are called ‘front-line’. This number is expressed in whole-time equivalents and dates from 2011. It was suddenly claimed that we only need 1,700. Ergo, we have approximately 2,600 staff surplus to needs.
First question: where does this 1,700 number come from? It didn’t come from Irish Water, or a departmental report, or the detailed reports by PwC, or local authority management. According to Dr. Fitzgerald:
‘There was a story in the Sunday Business Post . . . ‘
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At the Reform Alliance national chit-chat Ed Walsh popped up to talk about what the Health Services need. You might remember Ed Walsh – former President of Limerick University and the one who spread nonsense about the number of ‘welfare-tourists’ in Ballyconnell (you can read it about here and here).
Anyway, he made two calls at the weekend:
Mr Walsh called for greater privatisation of the health service, with other speakers calling for the “O’Leary-isation” of the sector to achieve efficiencies and better management. Mr Walsh also said it took Ryanair’s Michael O’Leary to make Aer Lingus more competitive and efficient, and said a further €3 billion health cuts are needed.
Let’s deal with the latter point first – the call for a further €3 billion in health cuts. Since the start of the crisis, Health expenditure has been cut by 12.6 percent, with the Government pencilling in another 2.6 percent cut this year.
So Ed, seeing that the health budget has been cut by over 15 percent, is still not happy. He wants to cut another €3 billion out of the health budget. That would mean additional cuts of 22 percent. Sure, what’s another round of even harsher cuts?
But Ed has an idea: the “O’Leary-isation” of the health services. Now I’m not going to even try to summarise the ‘better’ management of Ryanair. Acres of newsprint and websites have been devoted to Ryanair’s organisational culture. But this is a good encapsulation:
‘A former member of the cabin crew for Ryanair has blown the whistle on the working conditions at the budget airline company . . .Sophie Growcoot revealed the details of her employment contract with the company Crewlink, which acts as a contractor for Ryanair.
[She] explained that Crewlink forced her to take three months of compulsory unpaid leave a year during the winter months, when air traffic is slower. During that period of leave, the contract forbid her from taking additional employment yet provided no compensation.
Other grievances Growcoot listed included making her pay about $540 for her uniform and another approximately $2,700 for a required safety course. They also only paid her for the hours she was “in the air,” which didn’t include pre-flight briefings, turnaround time between flights, sales meetings or time on the ground resulting from delays or flight cancellations. In addition to the restrictions on when payment was received, the salary was only about $20 an hour without contractual review for three years.
Ryanair paid for only four days of work a week, though on the fifth day, Growcoot was expected to be on call to arrive within an hour of being notified, and these standby days were unpaid unless she was actually called in.
Growcoot recounted an incident when she was on standby and received a call to come in at 4 a.m. to work on a flight departing from Liverpool to Dublin. She paid about $15 for a taxi to the airport because public transportation wasn’t running at that hour. When she arrived, she was informed that the flight had been cancelled because too few passengers were booked on it, information that would have been available to the airline prior to calling Growcoot in. She claims she was then sent home without payment or so much as an apology.’
This is not necessarily the worst case (but it’s pretty bad); it’s just that this found its way into the House of Commons. I leave you to imagine how our health services could be reconfigured into the Ryanair way.
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Book Review: Catastrophism – The Apocalyptic Politics of Collapse and Rebirth, Sasha Lilley, David McNally, Eddie Yuen and James Davis (PM Press 2012)
Catastrophism is a collection of essays addressing the use of dooms day predictions in the environmental movement, the left, the right as well as in popular culture. The four chapters are authored by Sasha Lilley, David McNally, Eddie Yuen and James Davis following conversations within the Berkeley-based Retort collective guided by Iain Boal (who led an excellent biking oral history tour in Dublin as part of the Prosperity Project in May). This book is meant as ‘a political intervention, designed to spur debate among radicals.’ (4) I have taken this as an invitation for discussion.
Firstly, what is catastrophism? Sasha Lilley offers the following definition in the introduction:
‘Catastrophism presumes that society is headed for a collapse, whether economic, ecological, social, or spiritual. This collapse is frequently, but not always, regarded as a great cleansing, out of which a new society will be born. Catastrophists tend to believe that an ever-intensified rhetoric of disaster will awaken the masses from their long slumber—if the mechanical failure of the system does not make such struggles superfluous.’
Seeking a clearer understanding of what the writers meant by catastrophism, I listened to a podcast where Lilley explains that they are discussing an ideology around collapse and rebirth which assumes a new society will be born out of the ashes of the old. This kind of thinking, they argue, results in people waiting for the collapse rather than organising. They further claim that catastrophism is based on fear which works very differently for the right where it is mobilising, than it does for the left where it is paralysing.
Eddy Yuen begins by voicing a critique of the environmental movement. The central argument he puts forward is that the environmental movement is failing to mobilise because of its catastrophic discourse and an ‘apocalyptic narrative’ that presumes this will lead to political action. He is concerned that ‘dooms day scenarios’ don’t have a politicization effect and suggests environmentalists should find better ‘narrative strategies’.
Catastrophism, here, refers to the warning of environmental crisis. Dissemination of information, according to Yuen, does not lead to action. He claims the environmental movement has caused fear induced-apathy in the population. Yuen pins this to a deeply held conviction about politicization apparently held by environmentalists – if people have the facts they will act. While this may be the case for some, Yuen does not address the importance of understanding the dynamics of climate change and their consequences as a vital precursor to action. In the same way that knowledge of starving children in your city does not lead most people to take action, so knowledge about climate change does not necessarily lead to action. This phenomenon is not unique to the environmental movement.
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There is very little combined economic analysis of both parts of the island of Ireland. With the exception of some very useful and innovative work done by the NERI Institute, it is not clear there is any other body which attempts to look at the island economy by simultaneously integrating an economic perspective North and South.
This is regrettable. To take just one example, about one-third of what the Office of National Statistics (ONS) designates NI exports goes southwards, although the proportion of exports from the RoI to the North is far smaller. In fact, despite all the obstacles in terms separate jurisdictions, regulations, monetary and fiscal policies, etc., it is very likely that the two economies are more integrated now than at the time of Partition. But that is a question for another time.
A recent development from the Office of National Statistics (ONS) does allow at least some useful comparisons to be made. Gross Value Added (GVA) is a measure of total output in an economy which excludes the effects of taxes and subsidies on production, to remove the distortions caused by them. It can be used when comparing the levels and composition of output in differing regions.
The Central Statistical Office (CSO) has for some time provided a real measure of GVA, which excludes the effects of inflation. The ONS has only recently done the same for what it describes as the regions of the UK.
The results are in the chart below show real GVA in both parts of Ireland. The indices of activity are adjusted so that the year 2010 equals 100.
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This report was originally published on the Corporate Europe Observatory website today, the 24th of January 2014.
Far from being a solution to avoid future public bailouts and austerity, Europe’s new banking union rules look like a victory for the financial sector to continue business as usual.
In late 2013, the EU took a major step towards a “banking union”. This has been presented as a series of measures in response to the financial crisis to avoid a repeat of the vision of contagious risk and bailed out banks. In the preceding months a “single rule book” for banks and a European-wide system of supervision had been adopted. Finally in December a set of rules on a common regime of “resolution” (winding up) of ailing banks was agreed, and the European Council decided its version of rules on how to manage the question of the costs of resolution.
EU Single Market Commissioner Michel Barnier was a happy man:
“Today is a momentous day for banking union. A memorable day for Europe’s financial sector… We are introducing revolutionary changes to Europe’s financial sector… I have now delivered 28 proposals to better regulate, supervise, and govern the financial sector and a more integrated, less fragmented single market. So that taxpayers no longer foot the bill when banks make mistakes. Ending the era of massive bail-outs.”1
These bold promises are bound to be received well by the public in most parts of Europe. With the financial crisis, member states took over massive debts originated in the financial sector to save banks. Four and a half trillion euros had been risked for bailouts – and the final bill was 1,7 trillion euro. Not only did this send national economies spiralling downwards and set off a public debt crisis, it also led to a regime of harsh austerity policies, imposed by the EU institutions and the IMF as conditions for loans.
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We need to keep wages and employers’ PRSI (the social wage) low to ensure we are competitive. That’s the line being spun everyday by employers’ organisations, Government Minister and a number of commentators. You’d think from all this that Ireland suffers from high labour costs. Do we? Not a bit.
How much would average Irish labour costs have to rise just to reach the average of other EU-15 countries? Quite a bit.
As seen, labour costs in the business economy (essentially, the private sector) would have to rise by over 16 percent to reach the average of other EU-15 countries.
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The collapse of the Celtic Tiger economy, the unemployment and emigration that followed, the cuts in vital services and payments, the boarded-up windows, the ghost estates, the buddleia that sprouts where dreams of riches or steady employment died, not to mention the commitment made in our name, and enforced painfully in our daily lives, that speculators must be winners – all of this seems to have triggered seething anger, resentment and cynicism, but no flaming of popular resistance, no widespread demand for political or social transformation.
Late last year, it was reported that an opera about the banking meltdown was about to open in the Samuel Beckett Theatre in Dublin. Was this to be the unlikely spark that would light the flame? Would Dublin on the twelfth of December 2013 be like Brussels on the 25th of August in 1830, when (so the story goes) the patriotic fervor voiced in Daniel-Francois Auber’s opera The Mute Girl of Portici (La muette de Portici) – set in Spanish-ruled 17th-century Naples – so stirred certain members of the audience that they rose up spontaneously and (after a lively bust-up with more conservative elements) poured out into the streets, lit the flame of resistance, drove the Dutch out and so created independent Belgium. Sadly, this heart-warming story is a little too good to be true. The audience participation, as it were, was in fact pre-scripted by the revolutionaries and the conclusion of the opera can be read as arguing that popular revolution needs guidance from a wiser and socially superior leadership. Nonetheless, it is very likely that some ordinary citizens unsupplied with revolutionary scripts were spontaneously moved and, rising from their seats, did join the revolution. What’s more, by leaving before the last act, it was as if they were, in the words of James H Billington, ‘in search of their own ending’.
In the cold or watery light of January 2014, it is clear that AntiMidas, or, Bankers in Hades, the opera that played for three days in December has not triggered a revolution or significant social unrest. So, if we didn’t have the excitement of incipient revolution, was there excitement of any other kind at the Samuel Beckett Theatre in December when Trinity-based Evangelia Rigaki’s opera played? Happily, there was. Let’s set aside matters of definition (who can say what is or isn’t opera today?) and focus on the pleasures that were on offer. What we witnessed was almost cartoonish – a morality tale or parable in which the incarnation of the lust for gold, AntiMidas the supremely arrogant money-maker, was hurried towards his fall by an alliance of powerful enemies to a cackling commentary from a chorus of Media.
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With the great and the good meeting in Davos, it is worthwhile taking a look at how the top 1 percent is doing, courtesy of a wonderful website – The World Top Incomes Database. I can’t do justice to all the data this website contains so I’ll just throw out a few numbers but take the time to visit the site and do your own ‘inequality-sleuthing’.
How much of national income does the top 1 percent take up and how do we compare? Well, the Irish top 1 percent is up there at the top. Our top 1 percent takes up over 10 percent of all national income. Our wealthy take less than those in the UK but more than the top 1 percent in all others.
There has been a long-term growth in the national share taken by top income earners – consistent with trends in other countries though, in most cases, not as extreme as we saw above.
- The top 10 percent increased their national income from 27 percent in 1977 to 36 percent in 2009
- The top 1 percent increased from 5 ½ percent to 10 ½ percent
- The top ½ percent increased from 3 ½ percent to 7 ½ percent
It should be noted that when the crash hit, the income shares of the top 1 percent and ½ percent fell slightly (crashing property /speculation income would have contributed to this). But by 2009 this had stabilised and, in the case of the top 10 percent, has started increasing.
So, with a slight interruption, the long march of the top income groups continues apace.
And just to get an idea of how much these income groups earn, the follow table lays it out.
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Press Statement from Fracking Free Ireland
EU civil society voice opposition to European Commission green light for fracking
Some 300 civil society groups from across Europe have addressed their concerns over proposals by the European Commission to issue non-binding guidance for the shale gas industry this week.
In an open letter addressed to EU institutions, some 300 diverse groups from across Europe criticise the Commission’s proposals to issue non-binding guidance for the industry, which pave the way for shale gas exploration. The EU executive body will announce its plans this Wednesday, as part of its 2030 Climate and Energy Package. Pressure from the fossil fuel lobby, as well as from Member States, with the UK playing a leading role, has resulted in the Commission making a U-turn from its previous course to deliver binding legislative proposals, initially favoured by Environment Commissioner Janez Poto?nik in October.
As new drilling sites appear across Europe, from Barton Moss in the UK to Punge?ti in Romania, groups point to how the current legal situation in the EU does not even guarantee mandatory Environmental Impact Assessments. Lobbying from Member States during recent negotiations on the review of the EIA Directive have resulted in the exemption of an amendment which would have required mandatory EIAs for shale gas projects. With no specific regulations in most Member States and plans for EU-wide legislation now scuppered, communities are at the mercy of an unregulated industry which has left a frightening toll of destruction in its wake in the US.
The Commission’s move also flies in the face of EU public opinion. The results of a consultation it carried out last year reveal that two-thirds of EU citizens believe the shale gas industry should not be developed in Europe at all. When asked which policy option repondents would like it to pursue most, citizens chose the development of a comprehensive and specific EU piece of legislation, while industry opted for guidance.
Legislators seem intent to turn a blind eye to the dangerous realities of the industry despite its own recommendations. A study published by the Commission in September 2012 identified significant gaps in at least eight key environmental directives. The same study confirmed the high risk nature of shale gas activities. A growing body of peer-reviewed scientific evidence highlighting the threats to air, water and human health continues to emerge, along with an ever expanding list of global bans and moratoria, with Dallas, Texas the latest US community to outlaw the industry.
With failure from Brussels to provide protection to citizens, Leitrim County Council voted last week to insert a ban in its County Development Plan, lending a huge boost to plans for a nationwide ban.
To coincide with the Commission’s announcement this Wednesday, citizen groups will also be staging demonstrations in protest
Fracking Free Ireland – Brussels
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The World Bank has recently released its updated forecasts for the world economy. Two key features of the forecasts have received the greatest attention. The first is that the World Bank describes the overall trend in the world economy as at a ‘turning-point’ and secondly that this is led by a recovery in the advanced industrialised countries, or High Income Countries in the World Bank’s categorisation.
In terms of the forecasts, global GDP growth is expected to advance from 2.4% in 2013 to 3.2% this year rising to 3.4% in 2015 and 3.5% in 2016. Within that the Developing Economies are expected to grow by 5.3% in 2014, accelerating to 5.5% and 5.7% in 2015 and 2016 having grown an estimated 4.8% in 2013. But the bigger contribution to global growth is expected to come from the High Income Countries (HICs) which grew by just 1.3% in 2013 (estimated) rising to 2.2% in 2014 and 2.4% in both the following years.
So global growth is only ‘led by’ the HICs in the sense that the modest acceleration in projected growth is from the low base of 2013, a rise from 1.3% to 2.4%. By contrast the Developing Economies as a whole are expected to accelerate from 4.8% in 2013 to 5.7% in 2016, a rise of 0.9%. As a result the growth gap between these two key categories of the global economy narrows from 3.5% to 3.3%, on World Bank forecasts.
Over the medium-term the compound effect of growth differentials of this magnitude is very large. If a 3.3% differential in growth were maintained over 25 years, the Developing Economies would double in size relative to the HICs.
Turning to the performance of the HICs alone, the chart below shows World Bank data for their gross savings and investment (Gross Fixed Capital Formation) as a proportion of GDP (left-hand side). The growth of GDP is the grey line shown on the right-hand side.
What is clear is that all three variables are in a downtrend. That is, both the cyclical high-points and low-points become progressively lower over time. The slump in activity in 2008 and 2009 is the exception not the rule. The rule is a steady downtrend in activity.
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Landscape and Revolution in Ireland, France and America 1770-1810
Irish Landscape Institute Lecture
Dr. Finola O’Kane Crimmins
Thursday January 23rd at 6.30pm
Goethe Institut, 37 Merrion Square East, Dublin 2.
All welcome, please rsvp to email@example.com to reserve your space.
The original correlation of landscape and revolution took place on American soil in the heady decade of the 1770s.
This lecture will explore how this was projected back to Europe in order to engender revolution in the old world. It will identify which European sites were also invoked to do so and to what degree landscape tours became a precondition for revolutionary thought.
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I’m sure this will surprise no one but the highest income groups have seen their weekly earnings rise much faster than lower income groups.
From the latest period we have data for we see that managers and professionals earn much more than other workers in the economy – twice as much as clerical and production workers. And they have seen their weekly earnings rise much faster than other workers.
Managers and professionals have seen their weekly earnings rise by over 10 percent in the last three years. Clerical workers’ earnings have flat-lined. Production workers have seen their weekly income fall slightly.
As mentioned previously, we have to bear in mind the compositional effect. But overall, those with the highest incomes have seen their incomes rise. Not so, for lower income earners.
As I said, I’m sure no one will be surprised.
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This week our guest is Conor McCabe. Conor is a Research Fellow in the School of Social Justice in University College Dublin, and has just released the second edition of his book, ‘Sins of the Father: Tracing the Decisions That Shaped the Irish Economy’.
The book is a brilliant class analysis of the Irish economy since the origins of the state, and seeks to give a deep systemic structural analysis to the causes of the crisis, and to help explain why things panned out the way they did.
We discuss the Garden Cities of Ebenezer Howard, Irish economic policy and the British Empire, the rise of land speculation in Ireland, an extravagantly pointless Irish hotel, NAMA – the worlds largest property company, which owns all the worthless toxic commercial property in Ireland. Amongst other things…
You can find Conor’s book here. (It’s well worth the read…)
Happy New Year!
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