Financialisation

HANow

Housing Action Ireland Manifesto Launch: 12th of June, @6pm, Teachers’ Club Parnell Sq

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Housing Action Ireland

Housing Action Ireland has been working away quietly for some time, but on the 12th of June we’re launching our Housing Manifesto. This is a public event so we hope to see as many of you there as possible. The manifesto will be available one week before the launch – watch this space to get a copy. Full details below and more to follow.

Housing Action Now

in The Teachers Club Parnell Square

On Thursday June 12th 2014 at 6pm.

Screening of the 15 minute film Scattered by Joe Lee

and O’Devaney Gardens Residents and Workers.

Aidan O’Halloran and Raymond Hegarty will play some music.

A short version of the Housing Manifesto for online sharing is available here. The full version is available here.

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What is the Current Phase of Imperialism?

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A new situation requires a new analysis, and each new factor in the situation requires a specific and concrete analysis, placing it and its weight correctly in the overall situation.

In world politics, the new situation is that the US was unable to bomb Syria, it finds itself negotiating with, rather than bombing Iran, and its coup in the Ukraine may not be entirely successful in drawing Russia’s neighbour into NATO’s sphere of influence.

This overturns recent history. The overthrow of the Soviet Union in 1991 was accompanied by the US-led Gulf War. Since that time, the US and its various allies have bombed, invaded or intervened in Somalia (twice), Yugoslavia, Haiti, Afghanistan, the Philippines, Liberia, Iraq, the Maghreb, Yemen, Libya, Pakistan, Libya and South Sudan. The US has also led, organised or outsourced countless other interventions, overthrown governments and destabilised economies in pursuit of its interests. There has also been a series of coups and attempted coups in Latin America with varied success, and the so-called ‘colour revolutions’ in Eastern Europe to install pro-US, pro-NATO governments, as well as the US hijacking of the Arab Spring.

However, the economic rise of China has warranted a strategic ‘pivot’ towards Asia in an attempt to curb the rise of the only economy that could rival US supremacy in the foreseeable future. Given this absolute priority and the reduced circumstances of the US economy, it has been necessary to suspend new large-scale direct military interventions elsewhere.

This curb on US power has had immediate and beneficial consequences for humanity. Syria could not be bombed and neither could Iran. In these, Russian opposition to US plans was a key political obstacle, especially as the US wanted to deploy multilateral and multinational forces to do its bidding and needed the imprimatur of the UN Security Council. The US response to this blockage has been to increase pressure on Russia, most dramatically with its ouster of the elected Ukrainian government in a coup and its attempt to breach the country’s agreed neutrality by bringing it into NATO.

This curb on US power, however limited or temporary, should be welcomed by all socialists, by all democrats and simply by all those who desire peace. Instead, we have the strange spectacle that some on the left have raised the charge that Russia is imperialist, or that China is, or countries such as Brazil, or India or South Africa are ‘sub-imperialist’!

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Launch of ATTAC Ireland, 5/6 April

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Disarm the Markets: Launch of Attac Ireland with a public talk by Esther Jeffers (University of Paris VIII and European Attac Network) and IFSC walking tour with Conor McCabe.

Where: Room 4-027, Dublin Institute of Technology, Aungier Street, Dublin 2

When: Saturday 5th April, 2pm.

Attac is an international movement working towards social, environmental and democratic alternatives to neoliberal globalisation. Founded in France in 1998, it fights for the regulation of financial markets, the closure of tax havens, the introduction of global taxes to finance global public goods, the cancellation of debt, fair trade, and the implementation of limits to free trade and capital flows (see www.attac.org).

5th April marks the launch of the Irish chapter of Attac. Attac Ireland is delighted to welcome Esther Jeffers who will speak at the event. Esther is a lecturer at the University of Paris VIII and a specialist on shadow banking and finance in the Euro area.

Esther’s talk will be followed by an open meeting for anyone interested in becoming involved with Attac Ireland. This meeting will provide an opportunity for people to learn more about Attac, and to discuss how Attac Ireland could be developed to challenge financial power and injustice through education and activism.

These events will be followed on Sunday morning 6th April, with a walking tour of the Irish Financial Services Centre (IFSC) by Dr Conor McCabe (UCD School of Social Justice). Time tbc.

Follow Attac Ireland on Facebook

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They Partied. We Pay: Public Meeting, Connolly Books, Sat. 29th of March @2pm

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We All Partied?

They Partied. We Pay.

Public Meeting

Sat 29th March, at 2pm

Connolly Books
43 East Essex Street,
Temple Bar,
Dublin 2

The Communist Party of Ireland would like to invite you to the first of our new series of public talks.

The first talk will deal with the establishment false claims that we have left the bailout and put behind us the “Programme For Ireland.”

Nothing more than spoof and spin.

Speakers:

Dr. Conor McCabe
(Author and Editor of Irish Left Review)

Gareth Murphy
(Trade Union Left Forum)

Kathleen Lynch
(Professor of Equality Studies, UCD)

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From Alpha to Omega Podcast: #045 Dollar Hegemony

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This week our guest is Matias Vernengo.

Matias is an Associate Professor of Economics, at Bucknell University, and a former Senior Manager of Economic Research at the Central Bank of Argentina. He blogs regularly at his site Naked Keynesianism, as well as for Triple Crisis, and is currently the co-editor of the Review of Keynesian Economics.

We discuss a paper he recently co-authored with David Fields on the hegemonic role of the Dollar in the world economy.

We talk of the advantages of being the worlds reserve currency, the Bretton Woods agreement, Nixon closing the gold window, the Triffin Dilemma, threats to the dominance of the dollar in world trade, and the irrelevance of gold in today’s financial system.

You can find his excellent blog here.

The Triple Crisis blog here.

And the Review of Keynesian Economics Journal here.

You can also find the paper we discuss here.

Enjoy!

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Friday Stat Attack: The Financial Heaven that is Ireland

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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.

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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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A Union for Big Banks

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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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Ireland and the Shadow Banking System

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Now that we only have one copy have no copies of the first issue of the print edition of Irish Left Review left and the second issue is now available to buy either online or in these bookshops we are now publishing some of the articles from the first issue on the web. The first is Conor McCabe’s brilliant article on Ireland the Shadow Banking System.

Ireland and the Shadow Banking System

Bretton Woods and the Eurodollar Market

Conor McCabe

Ireland is a tax haven.  It is a hub in the shadow banking system.  The dominant form of business in the Irish state, the one to which national economic policy shapes itself, is that which accommodates the needs of foreign capital and finance, to the detriment of productive and social activity. This business model is an intermediary model. It is conducted by a middleman class which has positioned itself between foreign capital and the resources of the state. These middlemen are found within law, accountancy, stockbroking, banking and construction.

This is not to say that every successful business in Ireland is a middleman business, but rather that these businesses wield the most influence regarding national economic policy. The type of middlemen may have changed over the decades, but the way of conducting business has not.

The intermediary/middleman business model maintains and reproduces itself through the structures of the state. In other words, the class which benefits the most from this economic policy is also the class with the most influence over the dynamics of Ireland’s legal, education and political systems. Governments come and go but the structural dynamics of the state remain the same. As a result of the structural presence this class has within the state, policy change comes dripping slow.

The current privileged status of international finance and wealth management within Ireland – that is, paper assets over production – is the latest field of play for this middleman class. Upon independence it was live cattle exports to the UK and the transference of credit to the city of London; in the 1960s it was free access to the UK economy for international companies with branches in Ireland, followed by similar access to the EEC/EU, giving rise to construction, land and property speculation; all of this was underpinned by the selling of the State’s gas, oil and mineral rights to whatever bidder took the middlemen’s fancy.

The national resource that is for sale today is the right of an independent state to set its own laws and tax policy. In other words, it is Ireland as a mature democracy and legal jurisdiction, one that is recognised by international law that is traded by this middleman class for the private gain of its privileged players.

The current emphasis on paper assets over production reflects the fundamental changes in economic power relations which have taken place over the past forty years in advanced capitalist countries. This period has seen the financialisation of everyday life and the re-emergence of rentier capitalism. The move towards profit-seeking in paper assets is in part a response to the decline in the rate of profit and a tendency towards overcapacity in global manufacturing industries.  The pressure to return profits in a world of declining margins has seen reductions in social expenditures by national governments and stagnation in wages. The resultant decline in aggregate demand is an underlying factor in the explosion of price speculation over production.

This is part one of a two-part article on Ireland and the shadow banking system. The rise of the Eurodollar market and the decline of the Betton Woods system is covered here. The emergence of shadow banking and Ireland’s role in its operation will be covered in a future issue.

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Yes, Say it Again: Ireland IS a Tax Haven and it’s Worked Hard to Be That Way

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So the US Permanent Subcommittee on Investigations has declared that Ireland is a tax haven and Apple executives giving testimony to the committee have said that the Irish government gave them a special 2% rate. Rate in this context is irrelevant however, as the mechanism ensures that what Apple declares as taxable income is completely up to them. As many reports have suggested, Apple could pay as little as 0.05% on income earned and passed through Ireland, and the revenue appears to be sales tax on Apple products bought in Ireland. In addition they have also said that their Irish companies are not registered for tax anywhere, so that none of the $30 bn global income earned in the last number of years was taxed.The Irish government denies that it has provided special tax treatment to Apple, and that it is not a tax haven. This is the surest sign that it is one, according to Richard Murphy of Tax Research UK.

If you haven't already you could do worse than get one of the remaining handful of copies of the first issue of Irish Left Review, which includes a good interview with Ricard Murphy about the Irish system. There is also a long article about Ireland and corporation tax which deals this in a fair amount of detail.

However, with all the coverage I am drawn back to a post by Conor McCabe from July 2010 written around the time he was working on the chapter on the cattle industry in Sins of the Father. (Good news, the 2nd edition of Sins of the Father, with a new chapter on more recent developments will be published towards the end of 2013).

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Ireland is Hardwired into the Tax Evasion Network

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As reported today, “[Eamon Gilmore] did not believe that multinationals having headquarter operations in Ireland that used offshore locations as part of their tax avoidance strategies, put the country in a difficult position when it came to the subject of tax havens”.

The Tax Justice Network has made a point in recent years of replacing the term ‘offshore’ and tax haven with ‘secrecy jurisdictions’. This is their reason for creating the Financial Secrecy Index which lists Ireland at 31.

“The Tax Justice Network has estimated, conservatively, that about $250 billion is lost in taxes each year by governments worldwide, solely as a result of wealthy individuals holding their assets offshore. The revenue losses from corporate tax avoidance are greater. It’s not just developing countries that suffer: European countries like Greece, Italy and Portugal have been brought to their knees by decades of secrecy and tax evasion.

These staggering sums are encouraged and enabled by a common element: secrecy. Secrecy jurisdictions, a term we often prefer instead of the more widely used term tax havens, compete to attract illicit financial flows of all kinds, with secrecy as one of the most important lures. A global industry has developed where banks, law practices and accounting firms provide secretive offshore structures to their tax dodging clients. Secrecy is a central feature of global financial markets – but international financial institutions, economists and many others don’t confront it seriously”.

Irish politicians don’t take it seriously either, for the obvious reason that it remains good business for the Irish executives who operate the subsidiaries of foreign banks here, and who work in the law practices and accounting firms that advise large multinational firms on the international tax strategy. For a relatively small economy Ireland has a disproportionately large number of experts on international taxation.

So it’s unlikely, when talking about the need to attract foreign direct investment, or saying that that the Irish economy has to become more competitive to boost the export sector as a means of reducing the deficit that Eamon Gilmore or Enda Kenny would say that as a means of doing that we have to build on our excellent relationship with our largest trading partner: Bermuda, the off-shore the tax haven.

Taken from Mary Everett, The statistical implications of multinational companies’ Corporate Structures, Quarterly Bulletin, Central Bank of Ireland, April 2012

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Padriac White and the Establishment of the IFSC

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The following extract is taken from The Making of the Celtic Tiger: The Inside Story of Ireland’s Boom Economy. Dublin. Mercier Press. (2000). It is Padraic White’s own account of the development of the Irish Financial Services Centre.

In the middle of 1973, the IDA launched international services as its latest product. At the time, this category included both technical consultancy services and computer services. However, within the IDA’s own research unit, work continued to identify and analyse other service products, including those n the financial-services area. One of the economists engaged in this task was Ken O’Brien, who later, as founder of Finance magazine, would provide specialist coverage of the Dublin financial centre. Our New York office befriended a Wall Street lawyer, Bob Slater, who was familiar with the then-exotic world of offshore banking – the reasons why banks set up in specialist offshore centres, the kind of financial activities undertaken there and the nature and number of jobs created in this developing sector.

As manager of the planning unit, I agreed to take on Bob Slater, both as a financial consultant on financial services to IDA and to produce a study of offshore banking systems. His report examined the success of Bermuda in creating jobs in financial services, and he was satisfied that Ireland could emulate its achievement. And so in 1978 – innocently, in hindsight – we set out to promote international financial services to the world, and did so on a pilot basis to test-market the reaction. The IDA executives embarked on their selling mission, armed with the expert conclusions of the Wall Street expert.

During the year the IDA team soon landed some big fish in the form of two US banks that had developed specific job-creating proposals. However, the agreement of the Central Bank was first needed. Michael Killeen* considered the proposals sufficiently important for himself to go with Jerry Kelly, who was negotiating the projects, and myself to make the case for Central Bank authorisation. The reaction was not encouraging and we left the Dame Street offices feeling rather dejected. We could not give the required assurances or promises of authorisations to our foreign bank clients. The projects died and we ceased to do any more financial-services promotion. Subsequently, it emerged the bank no stomach for the projects and would not approve them. However, the IDA could never get a clear reason for this. The most authoritative word which came back indirectly was that the Central Bank believed the offshore financial projects ‘smacked of a banana republic.’ (pp.323-4.)

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