Austerity

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The Case of the Elusive Paid Job

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I’ve heard a great deal recently about economic recovery and job creation. Ireland’s unemployed should be optimistic, and if we’re not, well, who’d want to hire us with that attitude? All we need to do is ride it out, keep a positive outlook and before we know it we’ll all be upstanding citizens again, able to pay our bills without the weekly humiliation of social welfare. I’d like to believe that, but I don’t see any evidence of it: all I see in the jobs pages are some high-tech, highly specific positions in large multinational companies, jobs that require qualifications and languages that very few Irish people possess, and an enormous, unshakable, mass of Job Bridge Internships.

Yesterday I looked up one of the main recruitment sites and put “Cork” and “admin/PA/secretarial” into the search engine. I got five results for paid jobs (not Jobs Bridge), four of which were: “Finnish Customer Service Associate”, “Polish Accounts Assistant”, “Logistics Administrator with Turkish or Hebrew” and “German SAP Rep”. The outlook is similar whenever I search for vacancies. I’m under no illusion, I fully understand the requirements of EU free movement of workers, and I don’t deny the right of any person to take up work in another EU member state, but I cannot see how these jobs are going to filter through to the vast majority of unemployed people.

The system implies it’s our own fault; Irish people didn’t learn the right skills, we should have been able to predict the future. We’re told that we’re living in a globalised world now, and it’s up to us to stay “relevant” to ever-evolving labour market requirements, requirements that now, seemingly, we are surplus to. We are in over-supply: cheap, expendable and easily substitutable.

The Irish unemployed, it has transpired, must be happy to do Job Bridge Internships. After all, we are the great unemployable, why wouldn’t we be satisfied to work a full week for our dole? We deserve it for not learning obscure languages or qualifying in high-tech areas that didn’t exist five years ago. Every second job advertised, that doesn’t require unreachable and prohibitive levels of experience – from cleaner and meat-counter assistant to teacher, solicitor and scientist – is a Job Bridge Internship.

When I was in university it was common for students to work in retail or as waiters or waitresses part-time to fund their studies. Now almost every low-paid casual job is a Job-Bridge that requires the lucky participants to be on the Live Register for three months, so I can’t see how students could possibly hope to work. It’s not just students: so many people I know in their late twenties and early thirties, people with post-graduate qualifications and years of work experience, have not only done Job Bridges but have had to compete with other similarly qualified people to get them. When I hear of a friend getting an actual, paid job, it’s like a miracle, and even then it usually comes down to personal contacts.

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Friday Stat Attack: Ireland Holds the Record for Longest Domestic Recession in the EU

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Some commentators are celebrating our ‘recovery’.  Some have even said that we have recovered relatively quickly, after a dramatic fall.  Here we go again – rewriting history, distorting the current situation.

Ireland holds the record for the longest domestic demand recession in the EU.  And the really bad news is that we may not be out of it yet.  The following table breaks down the length of consecutive domestic demand recession that EU countries have suffered since 1960.

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Almost all EU countries have, since 1960, suffered at least a two-year domestic demand recession – with the exception of France and Malta (though data only goes back to 1996 for the island).  Some domestic demand recessions have been harsh – Estonia’s two-year experience saw a fall of over 30 percent; some have been mild – Poland’s two-year experience saw a fall of less than one percent.

Ireland – along with Spain and Greece – have the longest consecutive domestic demand recession:  six years.  And in the tradition of breaking the tie, let’s count the number of years that domestic demand fell since 1960:

  • Ireland:  12 years
  • Greece:  10 years
  • Spain:  9 years

With 12 years where domestic demand fell, Ireland wins on points.

Indeed, Ireland wins the double:  longest domestic demand recession and the highest number of years where domestic demand fell.  Since 1960, Ireland has spent 23 percent of the time suffering from falling domestic demand. That’s the cup.

But, surely, this is nit-picking – what with all that recovery going on.  So don’t worry about it.

Enjoy the weekend.

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In Ireland, the Jobs River Flows Uphill

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There’s a lot of confusion out there.  IBEC found the recent fall in consumer spending ‘puzzling ‘ – what with all the increase in employment.  Others have found it strange, too – strong employment growth but falling consumer demand.  Shouldn’t the big increase in employment translate into higher consumer spending and domestic demand?  What’s going on here?

Well, it’s only puzzling if you accept that employment grew by 60,000 over the last year.  However, once you lift the lid on the numbers and find that the 60,000-growth number in the CSO’s Quarterly National Household Survey (QNHS) is a statistical quirk, then it starts to make sense.

First, let’s note the CSO’s warning about interpreting trends in employment growth during the period they are realigning their sampling base with the 2011 census.  This realignment ensures that their Quarterly National Household survey sample is aligned with the population.  They do this after each census.

‘After each Census of Population the sample of households for the QNHS is updated to ensure the sample remains representative. The new sample based on the 2011 Census of Population has been introduced incrementally from Q4 2012 to Q4 2013. This change in sample can lead to some level of variability in estimates, particularly at more detailed levels and some caution is warranted in the interpretation of trends over the period of its introduction.’

Now let’s look at the employment numbers.  Between the 4th quarter in 2012 and 2013, employment grew by 60,900 – or 3.3 percent (not seasonally adjusted).  However, self-employment grew by 33,400, or 11.5 percent.  So, self-employment made up 55 percent of all employment growth.  Is this realistic?  No.

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Losers and Not So Losers

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It is often argued that the recession has been rough on all of us but that high income groups have had it the roughest.  European Commission Director István Székely came to Dublin late last year to assure us that the ‘the better-off sections of Irish society have borne the largest share of the brunt of the bailout programme’.  I don’t know whether this was intended to soften the blow as it were, making the austerity programme more palatable. I do know, however, that it is not true.   Dr. Székely is not alone; many have argued, using ESRI findings, that higher income groups have borne the greatest burden during the recession.  I will critique the ESRI findings below but first let’s go through some other evidence.

Wage Increases Higher income households have managed to increase their incomes, as noted in a recent Friday Stat Attack.

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This is not true for all sectors.  For instance, public sector managers and professionals have taken substantial hits in income. And there are compositional effects to take into account.  However, at a national level we see that this group has received a substantial increase in income compared to other workers whose weekly earnings have flat-lined.  Even if higher-income groups have taken a hit through tax increases they have managed to recoup a large part of this through increases in earnings.  This didn’t happen for most other workers, never mind those on social protection.

Unemployment

Losing one’s job is probably the biggest hit a household can suffer.  How have theselosses been distributed?

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Managerial and professional employment has actually increased during the period of recession while all other occupations have experienced a decline – in some cases, substantial declines.  And the occupational groups suffering a loss have lower income than the managerial and professional groups.   So lower income groups, on average, have been hit by the jobs recession much harder than higher-income groups.

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Friday Stat Attack: The Low-Paid Economy

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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.

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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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Ireland Needs A Wage Increase

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2014 should become the year of the wage increase.  Lord knows, workers need one.  Falling incomes, rising prices, increased taxation, cuts in income supports and public services – all have contributed to a toxic situation where living standards are falling, especially under the continuing burden of household debt.  So, yes, a wage increase is not only desirable but necessary.

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In the last five years weekly earnings have fallen by three percent, with the low-paid sectors (marked with an asterisk) of recreation and hospitality, along with the public sector, taking the biggest hits.

We should remember the compositional effect on these numbers.  For instance, if you have three people earning €5, €10 and €15 respectively, these three would average €10.  However, if the lowest paid loses their job, the average of the other two increases to €12.50.  Yet, those two didn’t experience a wage increase; it’s just that the composition has changed.  So, we might find in many sectors, the actual fall in weekly earnings for many/most workers is more (and vice-versa).

No doubt, arguments about ‘wage competitiveness’ and ‘wage inflation’ will be raised (isn’t it odd we never hear about ‘profit competitiveness’ and ‘profit inflation’, or ‘poverty competitiveness and inflation’?).  These are arguments we will return to later.  Hear I want to outline another issue – one which will impact on the kind of economy and society that is being created for us.

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How Bad Will It Get?

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Chancellor George Osborne has recently been promoting two ideas. One is that a recovery is under way and the other is that further cuts in government spending are needed, up to £25bn.

The contradictory nature of those two statements tells us something important about the nature of the current recovery and the actual content of economic policy. It is clear that however weak the current recovery is, the overwhelming bulk of the population will not benefit from it. Austerity policies have always been aimed at transferring incomes from labour and the poor to capital and the rich. So for example, a VAT increase was said to be necessary to cut the deficit yet was simultaneously implemented with a cut in the corporation tax rate which reduced government revenues by almost exactly the same amount.

The popular shorthand for this is a recovery solely for the 1%. The class content is clear. The policy is designed to boost capital at the expense of labour and its allies.

Austerity is not at all designed to boost total economic output, in which capital might be one of the beneficiaries. The reason is simple. In the ordinary course of events an economic downturn or slump leads to a fall in profits far greater than the fall in output. A simple recovery in output could entrench that for a prolonged period.

So, the owners of a car firm sell cars worth £1,000 million in a year. Their main costs are all the inputs of labour, capital and raw materials amounting to £800 million. But these largely to tend to stay the same or even continue to rise a little when the downturn occurs. Suppose sales fall by 10% to £900 million. Input costs are unaltered in aggregate. Now profits are only £100 million and previously they were £200 million. On a 10% decline in sales, profits have fallen by 50%. Profits fall faster than output.

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The Irish Media – Cheerleaders For Austerity

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This article by Julien Mercille first appeared on the Social Europe Journal on the 17th of December.

A study of Irish press coverage of austerity between 2008 and 2012 conducted at University College Dublin confirms that the media have been relentless cheerleaders for austerity. The case is so overwhelming that it may even surprise proponents of austerity. The full report is available here.

Ireland has distinguished itself among European countries by implementing austerity at the outset of the current crisis, while a number of other governments reacted by first enacting Keynesian stimulus packages, in parallel to bailing out their banks, before turning to austerity. Austerity might be good for elites, but it attacks ordinary people by cutting government spending on social services, health care and welfare. It seeks to make labour more ‘flexible’ by dismantling and downgrading work conditions and protections to give more power to employers over employees. On top of that, it raises regressive taxes like the VAT and encourages privatisation of state-owned enterprises and assets, often sold to investors at bargain prices.

European authorities themselves have announced explicitly, and even proudly, that austerity is used to attack the welfare state and ordinary people. Mario Draghi, the ECB president, declared in an interview with the Wall Street Journal that the European ‘traditional social contract is obsolete’ and that ‘there is no escape from tough austerity measures’. He further said that continuing ‘shocks’ would ‘force countries into structural changes in labor markets’. Accordingly, Europe’s population faces repeated attacks from corporate and political elites, a fact noted by the New York Times recently when it observed that ‘Americanized labor policy is spreading in Europe’. It remarked that in 2008, 1.9 million Portuguese private sector workers were covered by collective bargaining agreements, but that the number is now down to 300,000. Greece has cut its minimum wage by almost a fourth, Ireland and Spain have frozen it, and in general labour protections have been reduced in peripheral Europe, so that austerity is ‘radically changing the nature of Europe’s society’. The developments will transform so deeply the social fabric that the chief economist of the International Labour Organisation described them as ‘the most significant changes since World War II’.

Therefore, in order for elites to convince the population that austerity is good for them, or to reduce the intensity of protests against it, a lot of ideological work is needed. This is when the media step in.

Ireland might be a somewhat special case on the European media landscape because all its major news outlets are right-of-centre. While that’s bad for those who want to know what is really going on, it’s good for the Irish and European elites who want a favourable spin on their policies.

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Regaining Our Sovereignty: A False Trail by a Sham Government

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Statement from the Communist Party of Ireland

Today (15th December) the Irish establishment loudly proclaims that this state, and by extension the Irish people, has regained its sovereignty. This is as far from the truth as one can get. The Irish establishment has long since abandoned the little sovereignty this state ever had.

The Maastricht, Nice and Lisbon Treaties copperfastened the straitjacket on the democracy and independence of Ireland, and the current talks on banking union are for tightening the straps even further.

The EU-ECB-IMF troika and the “markets” are controlled by the same forces, the same financial speculators and the same transnational corporations.   The direct  and open control by identifiable global financial institutions and individuals is no longer considered desirable or necessary, but the same class and the same forces remain in charge  – with the complete and abject acquiescence of the internal political troika  Fine Gael, Fianna Fáil and Labour, and the Irish business interests they represent.

The indebtedness of this state to the amount of 125 per cent of GDP by the socialisation of the odious corporate debt imposed upon our people, is simply unpayable.  The programme of privatisation of  state owned companies and public service will continue.  The people’s wealth will be sold off at bargain basement prices.  The so-called “markets” will have first call on the wealth created by Irish workers in the form of debt servicing.

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Britain’s Economic ‘Boom’

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This post originally appeared in Socialist Economic Bulletin on the 19th of November. 

As the British economic crisis becomes more prolonged the outbreak of stupidity that greets every new piece of important economic data becomes more generalised. Previously there has been a campaign to suggest that austerity has led to recovery when the opposite is the case. The recovery is based unsustainably on rising consumption, led by government consumption. The publication of the latest GDP data for most major economies has now led to wild suggestions that Britain is booming and is the strongest major economy in the world.

The level of real GDP in Britain since the recession began at the beginning of 2008 is shown in the chart below. It is compared to the US and the Euro Area. British growth has been almost exactly the same as that of the Euro Area as a whole and significantly worse than US GDP growth.

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The Euro – exit stage Left?

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Paul Murphy MEP (Socialist Party) contributes to a discussion on what position the Left should take on the euro.

It hasn’t gone away, you know. Although much of the media and political commentary would suggest otherwise, the eurozone crisis is very far from resolved. The economies on the periphery of Europe all face deep economic crisis, the burden for which has been heaped upon working class and poor people, with the devastating social consequences seen at their most extreme in Greece. The situation in much of the rest of Europe is not much better. The political consequences of this ongoing crisis have been seen with near government collapse in Greece, Spain, Portugal and Italy over the course of the summer – with mass disillusionment with austerity a key underlying feature in all cases.

The Irish capitalist class has long tried to separate itself from the other peripheral countries – repeating the mantra that Ireland is not Greece and trying to demonstrate it by more effectively implementing austerity. It has been assisted in that task by the leadership of the trade union movement, which tied to the Labour Party, has attempted to stifle opposition

However, the facts and the crisis remain. The debt to GDP ratio is now at 125% in Ireland and rising. Another dramatic wave of the eurozone crisis could be unleashed at anytime by political or economic developments, the effects of which would be strongly felt in Ireland. The euro will again be at the centre of political developments.

As Ireland moves into primary surplus, the euro could become an important justification for austerity used by the political establishment and a battering ram against the Left. An important reason given not to default on debt or break from austerity policies may be the possible consequence of Ireland being forced out of the common currency. If the experience of Greece tells us anything, it is that an important argument of right wing forces in the next local and European elections, but in particular in the next general elections could well be – if you implement left or socialist policies, Ireland will be out of the euro and economic disaster will result.

Socialists and the Left must prepare to tackle this scaremongering, to demystify the euro and to put forward a left ‘exit strategy’ from the crisis that accepts the possibility of exiting the euro and puts forward radical socialist economic measures to deal with the consequences. There are two pitfalls common on much of the left to be avoided here.

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Breaking the Link? It’s Getting Stronger. It’s Strangling Us

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While Eurozone Governments continue to debate the details of the banking union; while the Irish government continues to insist that the deal reached last year includes bailing us out for past bank debt; while commentators debate and measure the link between public and banking debt; while the ECB steps into the void with its own peculiar version of ‘breaking the link’ between banks and states – while all this is going on, that game-changer which would break the link between state and banking debt is becoming ever more elusive.

With the latest data from Eurostat we can track the impact of banking debt on the public finances of Eurozone governments.

Impa_bank_crisis1

2010 was the worst year – with plucky little Ireland contributing nearly half of the total €66 billion.  It eased off in 2011 but it came back with force in 2012.  In total, the banking debt has cost the Eurozone €138 billion but this is just the Eurostat’s accounting of the largely capital impact on General Government Debt.  It doesn’t include interest payments, cost to wealth funds (such as Ireland’s National Pension Reserve Fund) or the impact of contingent liabilities, never mind the impact on the economies in general.  So this is a narrow accounting of a cost which is much, much higher.

Who got hit in 2012?  Ireland didn’t.  In fact, we recorded a small income increase due to bank repayments (€1.6 billion).  The main victims, however, can be found in the periphery.  Spain, Greece and Portugal accounted for 86 percent of the net impact on the Eurozone in 2012.  Spain, in particular was hit, with an impact of €39 billion on their public books.  But other countries got hit: Belgium, Germany, Austria, France and the UK with minor impacts in other countries.  In short, 2012 was the second worst year since the crisis began.

But the fun doesn’t stop there.  There are two more tables which show the continuing bank-debt burden on the Eurozone.  First, is the relationship between the stocks of government financial assets and liabilities arising from the support of financial institutions in the crisis.

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Breaking a Cycle

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This post was originally published on the 28th of October on the comradezhenka blog.

Socialists, Protests and Strategy

The last few years has seen a lot of frenetic political activity, there have been countless protests and mobilisations without much success in many of them. There were of course some obvious exceptions, the early CAHWT demos and more recently the Coillte protests The unions had organised some very big demos but they’re now in the distant past, and the recent ones are more a case of being seen to do something, rather than actually doing something. It seems like there has been an endless round of activism and it appears people are simply moving from one protest to the next. Every new cut in services is met with a protest, every attack on the working class is met with a demo. There are a lot of very good people putting a lot of effort into these activities. Unfortunately it seems as if we’re simply chasing our tails and one of the results of this is that the numbers attending have, in general, been declining. The lower numbers and the lack of substance to back up the demos ultimately leads to demoralisation and a downward spiral.

If you ask someone outside of the left what the left does, the answer is usually ‘protest’. Is that all we stand for? Of course not. We do however need to move beyond the cycle of tactical actions. Rather than objecting to every single manifestation of ‘austerity’ we need to develop an overall strategy for tackling capitalism. This means we need to break the current cycle of protests. We need to take a step back from the current level of activity and analyse what has worked over the last few years and what hasn’t. It is important we don’t get bogged down in the usual protest-recruit cycle that other groups thrive on, but ultimately leads to a dead end as there’s little substance to back it up. We need now to develop that substance. This is naturally going to be a long process involving as wide a range of voices on the left as possible. It certainly won’t be glamorous and will most likely be boring, but it’s vital for our long-term interests that we break this cycle and get back to some serious thinking.

This is not to say there should be no protests, but that we should pick and choose our battlegrounds more carefully. There are a myriad of cuts and attacks on the working class happening now under the guise of austerity, and we shouldn’t be looking to protest every last one of them. Simply put we don’t have the numbers to tackle each one of them individually. We have been trying to do this, and the result of it is diminished numbers at these demos. In my opinion this has the net effect of making the left appear weaker than it actually is. I know this won’t be a popular idea, but the left is thin on the ground and further dividing our strength by the sheer volume of (and sometimes competing) demos doesn’t serve us well. We simply don’t have the strength of numbers required to attend every protest, and in truth everyone knows the low turnouts make us look weak. We need to strategise our demonstrations, we need to decide what our priorities are and then take each invite to a protest and decide whether it fits into our strategic plan.

This will necessarily involve making some tough decisions. Nobody wants to turn away from any members of the working class that are under attack. But it must be done. We have to find other ways of supporting those groups, because truth be told having 300 people turn up to protest a cut in, for instance, the education budget does that group no favours at all. Ultimately it shows that those protesting aren’t strong enough to defeat the cuts, and makes them ripe for further cuts in future. I know some people will say that having 300 there is better than having no one, but really it isn’t, it amounts to the same thing: There is not enough force there to prevent the cuts.

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The Cash Hoard of Western Companies

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This post was originally published on Socialist Economic Bulletin on Monday the 21st of October.

Supporters of ‘austerity’ would have a very strong argument if there really were no money left. In that case, opponents of current policy would be left arguing only for a fairer implementation of those policies, or that perhaps they could be implemented more slowly.

This is not the case. Firms in the leading capitalist economies have been investing a declining proportion of their profits. This is the cause of the prolonged period of slow growth prior to the crisis and a number of its features such as stagnant real wages, so-called ‘financialisation’ and the growth in household debt.

This negative trend of declining proportion of profits directed towards investment reached crisis proportions in 2008 and is the cause of the slump. As a consequence of the sharp fall in this investment ratio there has been a sharp rise in the both the capital distributed to shareholders and in the growth of a cash hoard held by Non-Financial Corporations (NFCs). This cash hoard is a barrier to recovery, releasing it could be the mechanism for resolving the crisis.

The chart below shows the level of surplus generated by US firms (Gross Operating Surplus) and the level of investment (Gross Fixed Capital Formation) for the whole economy. Since the former are only presented in nominal terms, both variables are presented here in the comparable way.

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The nominal increase in profits has not been matched by an increase in nominal investment. In 1971 the investment ratio (GFCF/GoS) was 62%. It peaked in 1979 at 69% but even by 2000 it was still over 61%.

It declined steadily to 56% in 2008. But in 2012 it had declined to just 46%.
In a truly dynamic market economy there is nothing to prevent the investment ratio from exceeding 100% as firms utilise resources greater than their own (borrowing) in order to invest and achieve greater returns.

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