Irish Economy

mag_tri_rab

Who Was Right? The Magic Trick of Austerity

, , No Comment

The Irish economy has finally recovered 8 years after the slump began. This is the longest depression in the history of the State.  Since its inception the economy has grown at around 3% a year. So the lost output over 8 years means that the economy is now about 25% below its trend growth rate.

Supporters of austerity will claim that growth is a result of austerity. But this is a conjurer’s trick, asking us to suspend disbelief. The reality is very different. The Irish economy experienced a change of policy and a change of circumstances. It was these that produced recovery. Everything else is sleight of hand.

When Fine Gael/Labour came to office they implemented their own version of austerity. The response of the economy predictably was to re-enter recession from mid-2012 onwards for 4 quarters, creating the rare phenomenon of a double-dip recession. This is shown in Fig. 1 below. Recovery only happened later.

mb1

Fig.1 Real GDP

The policy response was marked, if little publicised. From the end of 2012 onwards there were no new net austerity measures. Instead government spending was actually increased. This was a turn towards stimulus spending, not austerity and is shown in Fig.2 below.

It is not possible to claim that austerity led to recovery. Government spending was increased after the end of 2012 and recovery began 6 months later.

mb2

Fig.2 Real Government Spending

The change of circumstances was even more dramatic and had a bigger overall effect on growth.  Since early 2014 the Euro has fallen by 25% against the US Dollar, providing a boost to exporters across the Eurozone and especially to very open economies like Ireland. Many other currencies are linked to the US Dollar in one form or another, notably the Chinese Renminbi. Together, these two economies alone account for 30% of all EU trade.

Read Post →

july29

Eurostat Has Done Us a Favour

, , Comment Closed

We should not under-estimate the impact of the Eurostat ruling. It completely removes the rationale for Irish Water and the water charges.  After Eurostat, there is no policy, no direction, no strategy.  Ministers will downplay the ruling with a ‘move-on-nothing-to-see-here’ rhetoric, punctuated by a ‘there-is-no-alternative’ but all this does is expose the inability to grasp how fundamentally the landscape has changed.

Eurostat was never going to rule in any other way than it did.  The Government admitted this last April in the Spring Statement when it put all water expenditure back on the books in its projections up to 2020.  The fundamental issue is not whether enough people paid the charges.  It was the ‘market corporation’ rule:  did Irish Water look like and act like a commercial company in a market economy?  Eurostat said no – and this is all down to the Government’s headless-chicken response after the mass Right2Water protests last October and November.

The Government capped charges, froze them until 2018, and introduced an indirect subsidy through social transfers (the water conservation grant).  The lack of ‘economically significant prices’ (i.e. charges that reflect the cost of producing water) and government control led Eurostat to rightly label the whole exercise as a mere reorganisation of non-market activities.  Given all this, what company in the world could be considered a market entity?

The main rationale for the Government’s water policy was not charges; this could have been introduced as a stand-alone revenue-raising measure.  Nor was it the creation of a single water authority; that could have been done as a public agency rather than a corporation. The over-riding issue was to take the estimated €5.5 billion of desperately needed investment over the next seven years ‘off-the-books’.  Everything flows from this:  to take investment off the books you need to create a corporation, you need to charge a ‘market-like’ rate for the service.

Remember those lectures from Government Ministers and commentators with that ‘common-people-just-don’t-understand’ attitude?  Without the investment there would be water shortages while we would all be walking through sewage.  And the only way to get this investment was through Irish Water and charges.

Eurostat has killed that narrative.  Investment will be on –the-books.  With that foundation removed, the edifice – and the rationale for that edifice (the corporation, the charges) – crumbles.

What now?  Whatever they say in public Ministers must know its game over.  The only way to pass the Eurostat test is introduce ‘economically significant prices’.  This would mean reverting to prices based on usage with no cap determined by an independent regulator.  Is that likely?  No, not with the potential to bring another 100,000 to 200,000 on the streets.  The people didn’t win many victories during the austerity days; they won the battle over uncertain charges, PPs numbers and cut-offs.  No political party is going to challenge that.

How do progressives react to this?  The safe ground would be to call for the scrapping of the charges and the reform of Irish Water.  Fianna Fail is already calling for that.  Progressives can and must go further.  We can’t effectively challenge the current ‘steady-as-it-goes’ Government approach with a ‘steady-as-it-went’ that dominated past policy.  We need creative and innovative thinking that can not only address the issues but present an exciting, inclusive alternative to water supply and all public provision.

Investment

We need to increase investment to €600 million annually to modernise our infrastructure.

Water investment has been a bit of a roller-coaster ride.  We are now slightly ahead of 1995 levels after peaking in 2008.  We need to do better.

Read Post →

banksy-youth-unemployment

No Country for Young People

, , Comment Closed

So you’re young, ready to take up work, make a bit of money and, most of all, make the social contribution that is expected of all members of the homo economicus species.  There’s only one problem.  You live in Ireland.

Following on from my previous blog on the weakness of our market economy to produce jobs – except in the construction sector – let’s look at employment growth by age.  Overall employment is rising, even if it is patchy.  But not for young people.   For young people, the jobs recession continues apace.

employment_growth1

Employment grew by 2.2 percent overall.  But for young people – between 20 and 34 years – it fell by 1.5 percent.  Among older groups – over 50s – employment grew by 5 percent.

When we drill down further, we find that those aged between 30 and 34 years saw employment fell by 3.1 percent.

This is part of a longer trend.employment_growth2jpg

Since the crisis began, employment has fallen by 10 percent.  However, for those aged 20-34, employment fell by a third.  For other age groups, employment has recovered and increased – with employment among 50s and over increasing by 14 percent.

There has been some discussion about bringing Irish people back from abroad.  It has been suggested that a main obstacle is our ‘high’ tax regime (sigh).  As we see above, the problem remains what it has been some time ago – lack of jobs (though there will be some sectors that are undergoing growth).

Young people face more problems than just falling employment.  Since 2008, nearly 475,000 people have emigrated.  Unsurprisingly, the majority who left were young people.  Over 300,000 men and women aged between 20 and 34 years have left the country – or 65 percent of all those emigrating.

emigration1

For those who stayed behind it’s still tough out there in the labour market.  The unemployment rate for those aged between 20 and 24 years the unemployment rate is 19.6 percent – twice the national average.  No wonder Eurostat estimates that 40 percent of young people are at risk of poverty or social exclusion (for the age group 18 – 24 years).

Read Post →

robinthumb

Growing the Economy the Robin Hood Way

, , Comment Closed

Who said the following?

‘ . . . if the income share of the top 20 percent (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20 percent (the poor) is associated with higher GDP growth.’

Or

‘The poor and the middle class (middle income) matter the most for growth.’

Or

‘ . . enhanced power by the elite could result in a more limited provision of public goods that boost productivity and growth, and which disproportionately benefit the poor.

The Socialist Party of the World?  The European Zapatista League?  The People’s Front of Judea (or the Judean People’s Front or the Judean Popular People’s Front)? 

No, it was the International Monetary Fund, that crazy gang that gave us poverty, deprivation and economic deterioration to just about wherever they went (now playing in Greece).

The IMF has recently published Causes and Consequences of Income Inequality: A Global Perspective – a strongly argued study that concludes that increasing equality is one of the best things a country can do to promote sustainable growth (that, and investment).  They propose a number of channels – fiscal redistributive policies, investment in education and health, and financial inclusion policies (e.g. basic bank accounts, etc.).

A particularly noteworthy finding is an estimate of the impact of redistribution on growth. 

impact1

If the income share of the poorest 20 percent increases by one percentage point, GDP grows by 0.4 percentage points.  However, if the income share of the highest income group, the top 20 percent, increases, GDP growth actually falls.

In other words, redistribution that leads to greater equality is good for the economy; redistribution that favours the highest income groups is bad (Britain after the Tory budget, take note).  You want to grow the economy?  Do a Robin Hood on it – take from the rich and give to the poor.

So what can we make of the Minister for Finance’s latest comments

noonan1‘I use the Budget for economic management purposes and I’m going to cut personal taxes in this Budget . . . I’m going to cut the Universal Social Charge (USC) by at least 1 per cent and maybe a bit more.’

The ESRI estimated the impact of cutting the USC’s standard rate of 7 percent on income groups.  This is what they found.

impact2

A cut equivalent to €500 million (cutting the USC standard rate from 7 to 5.35 percent) has almost no impact on the poorest 20 percent.  There’s not much of an increase in the second quintile group (the 3rd and 4th deciles).  However, the greatest gains go to the highest income groups – the 9th and 10th deciles.

Read Post →

222

Ireland’s Lean Mean Job Creating Machine is Looking a Bit Flabby

, , Comment Closed

You’d think, listening to Ministers reeling off employment numbers and media reports of new job announcements, that Ireland was some lean, mean job creation machine. Well, in comparison with other EU-15 countries we are neither mean nor lean. Indeed, we fall well behind in key sectors.

Let’s leave aside the arguments over the 2013 employment numbers.  I suggested that they were inflated due to a statistical re-alignment between the Quarter National Household Survey and the Census (you can read those arguments here andhere).  If people want to believe that job growth in 2013 (when domestic demand fell) was higher than in 2014 (when domestic demand rose by nearly 4 percent) – well, sure, go ahead.  I prefer to take on board the CSO’s warning about interpreting job creation trends in 2013.

Robust comparisons can only start with the last quarter of 2013.  That’s when the CSO finished its statistical re-alignment.  Therefore, we have two year-on-year periods to compare.  We should be cautious interpreting this data; it would be preferable to have a longer time-series.  Therefore, any conclusions are tentative and subject to revision.

The following looks at the market, or business, economy.  This is essentially the private sector, excluding the public sector dominated sectors (public administration, education and health) and the farming sector.  Here are the year-on-year figures for 2014 to 2015 Quarter 1.

emplo_growth1

This doesn’t look so bad.  Ireland’s employment growth is above the EU-15 average and ranks 4th in the table.  However, something interesting happens when we exclude the construction sector which is non-traded and which in the past the Irish economy overly-relied on for job creation.

emplo_growth2

Ireland falls well down the job creation table when construction is excluded  – below the EU-15 average.

In the last year, the Irish market economy generated 29,700 jobs.  Of this, 19,500 jobs were in the construction sector – or 66 percent.

When we look at the previous quarter – the 4th quarter of 2014 – we find a similar pattern.

Read Post →

33

€1 – Because We’re Worth It

, , Comment Closed

The Low Pay Commission will soon be recommending an increase in the minimum wage.  How much should it recommend?  Let’s start with the conclusion:  the minimum wage should rise by €1 per hour.  Now, let’s go through the arguments.

First, some background:  the minimum wage (NMW) is €8.65 per hour.  This rate was set back in 2007.  In 2011 it was cut to €7.65 but only a few weeks later the current government restored the cut; this would have affected very workers as employers would have been prevented by law from cutting the pay of workers already employed. 

Ireland is the only EU-15 country that has frozen the NMW since 2007 (with the exception of poor Greece where the Institutions demanded a cut).

11

The average increase (bar Greece) has been 16 percent in other EU-15 countries with a NMW.  A number of other, poorer EU countries have actually doubled their NMW (Romania, Bulgaria and Latvia) – but these countries were starting off a low-base.

Over that period thee has been an alarming rise in deprivation among those at work. 

  • In 2008, when the recession began, 6.6 percent of people in work suffered deprivation
  • In 2013, this proportion rose to 19.2 percent

Approximately 350,000 in work suffer from multiple deprivation experiences.  This is not necessarily confined to low-paid employees; there will be self-employed in this category while many workers higher up the wage ladder may be suffering from deprivation due to debt issues or rising child costs.  Nonetheless, it is reasonable to assume that a significant proportion are low-paid employees.

Read Post →

clearys

We Are Not a Cost

, , Comment Closed

If anyone is uncertain about the power relationship between employees and employers, I suggest they look to the Dunnes Stores dispute and the closure of Clerys.  These encapsulate the massive imbalance of power in the workplace. 

I won’t get into the details of these ongoing disputes.  Any rational person hopes the workers succeed – in the case of Dunnes Stores, to win the right to negotiate collectively and reduce the level of precariousness; in the case of the Clerys workers, to be given their fair share of compensation – and dignity – after years of services to the company.

So here, let’s take a step back and look at the presentation of the relationship between employees and employers.  This may seem, at first, abstract but it leads us to something fundamental.

It starts with costs.

Labels are powerful things.  For instance, costs; this is usually not a good thing:  ‘that was a costly venture’, ‘a costly holiday’, a ‘costly day out’.  These are things we usually try to avoid, unless the ‘cost was worth it’

‘Profit’, however, is usually something positive:  that was a ‘profitable experience’, I ‘profited’ from that lecture, we are ‘back in profit’.  Profit equals growth and prosperity.  Further, it is considered a good thing because it’s opposite – loss – is not.  Loss is bad for a household, a company, and a voluntary organisation.  Continued loss may result in bankruptcy or closure or poverty.

So when we discuss labour and capital in the economy or in a business, we are already using labels that colour the debate:  costs and profits.  If costs are something to be avoided or reduced in order to maximise benefit, then we must depress the price of labour (i.e. wages and working conditions), and diminish the agencies that champions this ‘cost’ (e.g. trade unions, the collective bargaining power of workers, legislation that benefits workers). 

Likewise, if profits are an unqualified good – we should support the agencies that maximise profits and gear our legal, labour and tax framework to that end. 

Even before we begin discussing the relationship between wages and profits, the former is considered a cost, a burden while the latter is a sign of prosperity, growth.

The interesting thing about this highly ideological reading, is that it is not vindicated by basic economic accounting (here comes the abstract part).  

An enterprise creates income by creating gross value-added.  We can measure this by the following:

Gross value-added equals sales revenue minus the purchase of goods and services needed to produce the product the enterprise is selling (rent, accountancy services, machinery maintenance, etc.). 

The important point here is that employees’ wages and working conditions is not a cost in the measurement for creating value.

Read Post →

aus_treaty

The EU Fiscal Rules: Not Fit for Purpose

, , Comment Closed

What would you say about a system for your car that was sold on the basis that it would alert you to an upcoming crash?  A good idea, no?  Except that the system only warns you after the crash.  There you are, in a massive, multi-car pile-up, bleeding all over the M50 – and only then does the system kick in:

‘Warning, warning, you are an imminent danger of having been in a crash – warning, warning.’

You’d be right to sue.

That’s how the EU fiscal rules operate:  it purports to provide an early warning system against economic crash but, in fact, it does no such thing.  We should return it to the manufacturer, unopened, postage due.

Remember the Fiscal Treaty campaign?  It was claimed by the proponents that we needed these rules because it would prevent things like the Great Recession and, in particular, the Irish crash of 2008.  We needed these rules because we Irish are irresponsible – along with the other PIGS states.  If only we had these rules we could have escaped the crash, the debt crisis and the recession – which was, of course, brought on by our fiscal irresponsibility.  That was the narrative. 

But the cold reality is that were these EU fiscal rules in active operation they would not have seen, predicted, never mind warned of the impending crisis.  It would have been as useful as a diviners’ rod.  How can we know this?  Because the EU Commission, the fairground purveyor of these miracle rules, tells us so.

The rules focus on the structural deficit.  This measures the deficit when all the cyclical components are stripped out – that is, all the boom and the bust parts of the economy.  It purports to tell us what the deficit would look like if the economy were on an even keel. 

If so, then the EU rules should have been blaring warning sounds with red lights and sirens in Ireland in the years before the crash.  Everyone knew (if only in private) that during the period of 2000 – 2006 Irish public finances were dangerously over-reliant on revenue from the speculative boom.  Everyone – except the EU Commission and their rules.

 Let’s look at the estimate from the EU Commission itself.  Remember:  if the figure is in plus, that means we were fiscally responsible, our public finances were robust, and we were almost German-like when it came to prudent budgeting. 

sd1

Oh, my:  according the EU rules and methodology we had extremely sound public finances.

Read Post →

qq

Drawing Lessons from the Public Sector Pay Talks

, , Comment Closed

With the public sector pay negotiations getting underway, it is timely to step back from the details and look at the broader landscape.  For it is clear:  if the wage structure in the overall economy mirrored the wage structure in the public sector, we would have a more prosperous economy and society; the recession wouldn’t have been so hard, the recovery wouldn’t have been so delayed, and the social deficits arising out of inequality would not be so endemic. 

While there is much focus on the private-public wage differential, there is less attention paid to the distribution of wages from the bottom to the top – which is the key to long-term sustainable growth and better social outcomes.  Let’s have a quick look at the former first.

The CSO has done exceptional and detailed work on comparing private and public sector pay.  The lazy comparison is to compare the headline average private and public sector pay.  However, this comes up against the like-for-like dilemma.  For instance, there are no hospitality workers in the public sector; there are no Gardai in the private sector.  Without a like-for-like comparison you get all sorts of numbers that don’t tell you much.

The CSO has compensated for that – comparing professions, age, duration of employment, size of enterprise, educational qualifications.  When they do that, they come to some interesting conclusions.

psp1

Among this grouping – which makes up the overwhelming majority of public sector workers – the ‘premium’ (i.e. the additional amount public sector workers above private sector workers) is a little more than one percent higher.  On a like-for-like basis, public sector workers earn fractionally more than private sector workers. 

What is more interesting is the gender difference.  Men in the public sector actually earn less than males in the private sector – two percent less.  However, women in the public sector earn five percent more than their private sector counterparts on a like-for-like basis.  And this is a good thing when one considers that women still face pay (and other types of) discrimination in the workplace.   If there was less gender discrimination in the private sector, the overall public sector premium would probably turn negative.

Just one more word:  This data comes from the CSO.  Since 2010 there have been small wage movements.  Between 2010 and 2014 (4th quarter):

  • Increase in private sector weekly earnings:  2.3%
  • Increase in public sector weekly earnings: (-0.7%)

Read Post →

1

The Minister’s Problems with the Unemployed and Statistics

, , Comment Closed

We all know there will be people who will never work. They’re allergic to work.  So we’re not including those in the statistics. But everybody who wants a job will have a job in the next couple of years.’

There were a lot of criticisms of the Finance Minister’s comments, rightly describing them as a slur on people who cannot find a job.  What I also find illuminating is the innovative approach to statistical representation.

Imagine saying ‘We all know people who are allergic to obeying the law.  So we’re not including those in the statistics.’ Or ‘We all know people who are allergic to paying taxes.  So we’re not including those in the statistics.’  See – we just eliminated crime and tax evasion.  There’s no end of progress we can make on the outstanding issues of the day if we just employ the ‘Noonan Manoeuvre.’

But there are some statistics that the Minister is not including as well – statistics that his own government gathers and sends on to the EU.  Like this one:

  • There are 20 unemployed for every job vacancy.

This comes from the Eurostat Vacancy Rate as reported by the Nevin Economic Research Institute.  We’re not as bad as Greece where there are 74.3 unemployed for every job vacancy but we have a long ways to before we reach Belgium (5) never mind Germany (2.1).

To put that 20:1 ratio in perspective, imagine someone dropping five €10 notes from the roof of a building on to 100 people in the street.  There’s a mad scramble and eventually five people walk away with the notes.  But 95 people don’t.  What do we say about those empty-handed 95?  They’re allergic to €10 notes?  The mind reels.

But the Minister’s capacity to not include statistics does not end there.  Take this one.

There are, according to the last Quarterly National Household Survey, 2.153 million people in the labour force.  There are 1.939 million in work.  When you subtract those at work from the labour force you come up with 213,000.  That’s the number of unemployed.  The number of unemployed doesn’t determine the number of jobs in the market.  There are still only so many jobs to go around for a larger number of people looking for them (there are niche exceptions where an employer has a vacancy but can’t find someone with the matching skills necessary – a phenomenon in the ICT sector and foreign language skills; maybe we should teach all the unemployed Dutch?).

Of course, there are ways to manipulate this equation which, also, rarely gets included.

Read Post →

empPock

To Those Who Have Made the Biggest Sacrifice – Nothing

, , Comment Closed

Government Ministers are fond of saying that they want to repay those who made the biggest sacrifices; hence: tax cuts.  They have also stated that they want to target the ‘squeezed middle’ which they define as the income group between €35,000 and €75,000.  This is an interesting figure.  A household with two people working at the upper end of this ‘middle’ could earn nearly €150,000.  This government wants to reward them because it is obvious that their current income level is a terrible sacrifice.

For me, those who have fallen into deprivation – now that’s a sacrifice.  And there are a lot of people who have been sacrificing.

Social Protection Payments 1

In 2013, there were over 800,000 reliant on social protection payments in these three categories, both recipients and beneficiaries.  Deprivation has increased from 45 percent to 76 percent.

However, in the Government’s discourse of sacrifice, these people never feature.  They have been effectively air-brushed from the social debate.  The standard response of Ministers is that they have ‘protected’ basic social protection payments but they have done nothing of the sort.  They have frozen these payments, which means that the value of the payment has fallen due to inflation.  Since the Government took office:

  • A single person has suffered a real cut of 3 percent, or €5.69 per week
  • For a couple, the real cut has been €9.45 per week

So how much have the unemployed, lone parents and the disabled and sick lost out on since the cuts commenced in 2010?  Let’s look at the nominal (i.e. the actual amount in Euros and cents) and the real cuts (factoring in inflation.  We will take this out to 2016, using the Government’s projected growth in inflation, to get a sense of what would have to be spent to compensate people’s sacrifice.

Read Post →

mtaftR2W

A Democratic Economy, A Prosperous Society, A Risen People

, , 1 Comment

This is the speech I delivered at the May Day Conference organised by the five trade unions affiliated to Right2Water

 

When the Left wins the next election and forms the first progressive government in the history of the state, it will be inheriting severe economic and social deficits:

  • After seven years of recession and austerity our social infrastructure, in particular health and education, is in desperate need of repair
  • Nearly 1.5 million people live in deprivation
  • A crisis in low-pay and precarious work conditions
  • An investment crisis
  • One of the weakest indigenous enterprise sectors in Europe with an industrial policy that is mostly based on maintaining Ireland’s role in the global tax avoidance chain
  • And a golden circle of corporate and political interests which will fight like hell to expand their spheres of control

And if these aren’t challenges enough, the range of interests that will line up against us will be daunting.  Fine Gael and Fianna Fail will be the least of it.

IBEC, ISME and the SFA, Chambers Ireland and the American Chambers of Commerce, media outlets and commentators, Independent House, CEOs, EU institutions, the IMF and the OECD – a whole alphabet of hostile forces who will from the first day work to undermine us, destroy people’s confidence, and put up every obstacle possible.  And that’s just for starters.

If you’re in any doubt, just ask Syriza.

The five trade unions affiliated to Right2Water are seeking to bring together all the ideological, historical and community strands that constitute progressive politics to help meet these challenges.  

  • To start a constructive dialogue that will hopefully lead to an agreed set of policy principles that will form the core of a progressive government. 
  • Principles that are radical and deliverable, an alternative economic, social and political architecture based on a new common sense
  • Principles that give people confidence that we have an understanding of their everyday problems which leads inexorably to a collective and shared resolution.

We have started this process in the principles we have produced here today.  We will be adding to them.  They are not in any order of priority – but they are all urgent. We invite everyone here to contribute to this process and to come together on June 13th to debate and decide. 

The Low-Tax, Low-Spend, Low-Service, Low-Investment Economy

One of those urgent tasks is to break from the low-tax, low-spend, low-investment, low-service model the Government is foisting upon us.  This is the trap celebrated in the Spring Statement – a set of budgetary rules that will permanently immobilise national governments and impoverish the European people.  What can you make of this fiscal rule cookbook? 

You-take-heaping-of-a-10-year-rolling-average-of-potential-GDP-which-cannot-be measured-in-the-real-world,-based-on-components-like-Total-Factor-Productivity-which also-cannot-be-measured,-stir-in-a -convergence-margin,-pour into-the-GDP-deflator-and-put-in-the-oven-and-bake-until-the-reference-ratio-minus-the-convergence-margin-divided-by-100-and-multiplied-by-the-%-GDP-price-deflator-determines-the-allowable-nominal-spending-growth-net-of-DRM-or-discretionary-revenue-meausres.

 Take from the oven.  And don’t forget to subtract one. 

There is one word for this – mindless.  This is Father Ted economics.

A progressive government will have to deal with these rules – now in our Constitution, approved by the majority of people even if under duress.  We will need to push them out at every opportunity.   At the same time, we must work with our comrades in Syriza, and Podemos when they form the next government in Spain, to unravel these rules.

For the June 13th conference the Right2Water unions will publish an alternative fiscal framework – to inform the discussion of how we can turn the rules to our advantage.

The Government is launching the second phase of austerity.  In the first phase, Ministers announced actual cuts in public spending.  In the second phase, public spending will be kept below the rate of inflation, thus cutting its value.  This at a time of increased demographic pressures. We are facing into an indefinite period of what can be called ‘real austerity’.

A progressive government will reverse this.  We do not fully appreciate how little we spend.  We would have to spend an extra €10 to €12 billion a year more just to reach the average spending on public services, social protection and investment of other EU countries.  The Government claims they will do more with less.  The reality is that they will do less with less. 

Why?  Because the Government is locking-in a low-tax economy – one that will benefit the interests of capital over people.  The Government is pulling off the same stunt that Fianna Fail did prior to the crash – driving down taxation to unsustainable levels.  Except today we don’t have the windfalls of speculation, today we are bearing the cost.  Therefore, the Government will drive down living standards and privatise and outsource public services to subsidise its tax cuts.

Progressives compete over tax cuts at their peril.   Workers in Ireland are not highly-taxed by EU standards. However, our living standards are highly taxed, highly priced and highly inadequate.  We are driven into the private sector to purchase goods and services that workers elsewhere receive for from the public sector for free or at below-market rates.

Read Post →

easter_bunny_in_the_snow

A Statement in Spring, A Society in Winter

, , Comment Closed

What was the point?  Two documents with over 100 pages between them.  Hours spent in the Dail.  Many more hours of commentary in the media.  And the whole thing boiled down to only one substantive policy statement:  the Government will have between €1.2 and €1.5 billion available for tax cuts and spending increases, which they intend to disperse on a 50/50 split.  That’s it.  Would have taken a Minister a few seconds to stand up and say that.  Instead, we got bells and whistles and the Spring Statement.

While we were led to believe the Government would outline their plans for the next five years, they did no such thing.  Tables feature budgetary projections up to 2020 but after 2016 they are, in policy terms, meaningless.  All they show is what would happen to revenue and expenditure if there were no policy change; in other words, no spending or tax changes.  So we have to take the Government’s intentions in 2016 and extrapolate from that based on Ministerial nods and hinds.  Let’s go through a few points.

Permanent Austerity

We are now entering Phase Two of austerity.  The first phase involved Ministers announcing actual cuts in government spending.  The second phase will see public spending cut in real terms; that is, after inflation.  Public spending will struggle to maintain pace with inflation.  And this at a time when we have (a) a massive social repair job after the damage of years of recession and austerity; and (b) growing demographic pressures.  And none of this considers trying to move to a modern European social state.

In 2016, we can see this pattern starting.

primary_spending

 

 

 

 

 

Primary spending (which excludes interest payments) will rise by approximately €400 million in net terms.   This no doubt includes €200 million in reductions in unemployment-related payments.  However, using the GDP deflator as a proxy for inflation, we see an actual cut in spending – because spending would have to double just to keep pace with inflation.

Austerity is dead.  Long live austerity.

 

 

Playing the Fianna Fail Card

Prior to the crash, Fianna Fail slashed all manner of taxes.  They got away with this because the coffers were filling up with revenue from the speculative boom.  When boom turned to bust, the weakened revenue base was exposed and public finances collapsed.

Read Post →

1

From Protest to Politics: How Can We Get a New Republic?

, , 3 Comments

An important question that those opposing the water charges, austerity, growing inequality and those looking for an alternative to the establishment political parties are asking is; what exactly are we looking to achieve and how are we going to do it? There are immediate changes needed such as getting rid of the water charges and Irish Water, reversing austerity and cuts and standing up to Europe (and with Greece) on the immoral debt. There are also more profound changes being sought such as achieving the right to housing, health, education, decent jobs etc for everyone. These will require the creation of a real Republic of equality and a genuine democracy where people are treated with dignity and have a real say in the running of their community, their country and Europe. But the most important change is already happening; that is the active participation and empowerment of the (extra) ordinary citizens at the grassroots who are changing their world by standing up for themselves through protest and political action.

It is becoming clear to more and more people that a government dominated by the establishment parties (Fine Gael, Fianna Fail, Labour, Renua & other ‘fake’ independents) will not achieve these necessary radical reforms. Ordinary people have to do it themselves by creating a government that is made up of the people’s representatives – without any of the establishment parties involved. A people’s government would be anti-austerity, anti-establishment, rights-based, and progressive. Let us learn from previous mistakes and understand that it is not sufficient to be a minor player in government – for real change the people’s representatives must be the government.  To do this anti-establishment and anti-austerity groups and parties will have to convince the majority of people in Ireland (particularly the undecided voters from a wide breadth of societal groups) to vote for anti-establishment candidates. The task then is not just to protest and resist but also to try win the coming general election. In order to win we must believe that we can win and we must plan to win. But winning is not just changing the faces in government, it is bringing about a New Republic – a real democratic transformation by an empowered citizenry.

This means that electing an anti-establishment government is only one part of a process of empowerment of ordinary people to transform Ireland. That process must also take place in communities and workplaces, creating new forms of socially caring and enterprising employment that can make solidarity and cooperation the key values of any New Republic. It also means that election and government processes should be led by the citizens, communities and ordinary people. It should continue the new wave of citizen empowerment from the water movement. This also means that if anti-establishment opposition do not win the coming election at least we will have been further empowered to pressure whatever new government is elected to take these issues seriously. Importantly, it will ensure that a solid foundation is put in place to be the major opposition (in the Dail and on the streets) and to be in a much better place to win in the subsequent election, which could come much sooner than expected, and to continue to protest and campaign on a wide range of issues.

Convincing a majority of the population to support an anti-establishment political alternative is going to be extremely difficult and challenging. Multiple approaches and strategies are required. None of the anti-establishment groups, the trade unions, independents, Left political parties, or the communities can achieve this on their own. Therefore, unity and coherence is required amongst as many of these as possible in order to offer a clear alternative to people in the election. This will show people that we are serious and that there is a credible, serious and coherent alternative that is worth voting for.

That is not to say everybody has to be part of the one organisation or alliance. There is the opportunity for multiple organisations to be part of a new alliance or there might be a number of alliances and parties co-ordinating together. There will be some who do not wish to be part of any of these and that should be respected just as the desire for those who want to work together on this new alliance should also be respected. The politics of new alliances must be inclusive and respectful of each other and the principles or plurality and diversity. If we are not trying to be the very change we want to see in the world then we have failed from the start.

One idea could be to form a new umbrella alliance or political movement like Syriza in Greece, Podemos in Spain or the SNP in Scotland. This new alliance could be made up of some of the Left parties, new movements, independents, communities, trade unions, and individuals. Let’s call it the Movement for A New Republic for the moment. In the election the people would have a real choice between the Movement or the establishment parties. The Movement for A New Republic would say to the people ‘we are standing for election to become a government of the people that will not involve any of the establishment parties’. This new political movement would aim to represent the ideals and vision of the 1916 Proclamation- in a meaningful way – for a sovereign, democratic, New Republic, New Ireland of equality and social justice, based on the protection of the vulnerable, community and fairness and assertion of the rights of all.

One single major political alliance or movement appears to be a key part of gaining majority public support for a new radical politics in Greece and Spain, rather than lots of smaller groups. The experience of other countries also suggests that the success of new political parties and movements is exactly that – that they are actually new and are not dominated by their past. A new movement that is clearly anti-establishment, standing for the ordinary people against the cronies and elite, made up of leaders that are new (or clearly independent from) to the political system, could gain significant additional support, and therefore, increase the possibility of an alternative government and a new politics in Ireland. This movement should also play a key role in representing the desire for a completely new politics in Ireland for the long term beyond the coming election.

Ideally then the Movement for a New Republic would include the broadest possible alliance from Sinn Fein to Says No Groups, trade unions, independents, communities and socialists, similar to the successful water movement. While there are many differences between these groups – the only realistic way an alternative government is going to be formed is to work together. Anti-establishment candidates should be supportive of each other against the common enemy of the establishment parties. There has to be an end to divisive actions and attacks on each other, and removing dogmatic approaches that alienate potential supporters beyond the ‘true believers’, and an agreement that we want to be in government and not just permanent opposition. There would need to be Movement candidates in every constituency in order to get sufficient TDs to gain the majority to form a government. The media will also be an important battle ground and, therefore, leaders and spokespeople are required who can represent the message of the new movement in a way that connects with the majority of people.

Read Post →