Economy

boom_and_bust

A Return to Boom-and-Bust

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Never mind the details.  If we are to believe even half of the media leaks, the Government is preparing to return us to the kind of boom and bust fiscal policy that dominated the pre-crash period.

The context is different but the character is the same.  Between 1997 and 2007 corporate tax was slashed, capital gains and inheritance taxes were halved while the effective personal tax rate fell by 25 percent.    During that period budgets rode the wave of property tax revenue but when the crash hit our hollowed-out tax base was exposed. Revenue fell by over 22 percent or €16 billion in the first three years of the crash, resulting in a massive deficit.   The economy was built on the quicksand of unsustainable tax revenue.

Fast-forward to the 2016 budget to be presented tomorrow and a whole number of tax-cut goodies are being dangled in front of us:

  • USC
  • Self-employed
  • Landlords
  • Inheritances
  • Capital gains
  • Corporate tax (knowledge-box) and other business taxes

The Taoiseach has made it clear this is the first of a series of tax-cutting budgets.   We are hurtling back to the future.

Some may argue that increased tax revenue can more than make up for this.  But budget management now determines that excess revenue will have to be used to pay down debt – paying for tax cuts and/or spending increases will require equivalent tax raising and expenditure reduction measures (beyond the fiscal space of €1.5 billion).  The EU fiscal rules put us in a whole different game.

However, this game doesn’t prevent fiscal irresponsibility any more than they wouldhave prevented the pro-cyclical polices prior to the crash.  And this is where the problems arise.

Today, tax cuts will be subsidised, not by property boom revenue but by depressing badly needed public spending increases.  The Government has set aside €750 million for spending increases.  But:

  • A minimal €200 million has already been assigned to capital investment.
  • The Government’s Spring Statement and the Irish Fiscal Advisory Council state that €300 million is needed just to keep pace with changing demographics.
  • And a further €200 million is needed just to inflation-proof non-pay expenditure on public services. 

That’s €700 million before we even get out of the starting gates.  And this doesn’t include the Lansdowne Road Agreement or increases in social protection (somewhat offset by declining unemployment payments).  More importantly, this doesn’t factor in the considerable social repair that needs to be undertaken in the wake of austerity.  And as for expanding public services to European norms – that’s not even on the agenda.

While expenditure may exceed this €750 million, it will have to come from somewhere – including cutbacks in other areas of expenditure.  This is not as ominous as it sounds; savings from reducing the prescription medicine bill can be redirected into other areas.  But there is a limit to these savings.

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Renua’s Carnival Ride Back to Boom-and-Bust

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The silly season usually refers to August.  Now we have the silliest of seasons –the run-up to a budget in the run-up to a general election.  Minister Richard Bruton has recently called for a low flat rate tax on immigrants and returning Irish, along with cutting capital gains tax to 10 percent.  Brian Lucey has called some of the ideas both bad and stupid.

But Minister Bruton runs a poor second to Renua in the race-to-the-ridiculous stakes.  Renua has called for a flat-rate tax.  It represents a massive transfer from the lowest income groups to the highest income groups.  It will require low and middle income groups to fund not only their own tax cuts but even higher tax cuts for those on much higher incomes.   As Brian says of Minister Bruton’s proposals – it is an idea whose time has not come (and hopefully never will).

Renua proposes that income tax, employees’ PRSI and USC be abolished and replaced by a flat-rate tax of 23 percent.  This will be complemented by what is called a ‘Basic Income’ that tapers out slightly above average earnings (this is not actually a basic income – it is a hybrid of a tax allowance and negative income tax).  Renua doesn’t detail how this tapering works so we can’t do an income distribution impact assessment for all income groups.  However, here are a couple of examples from their own pre-budget submission with some estimates of my own.

Renua

Yes, you’re reading the graph right.  A low-paid worker on €20,000 would end up paying more tax.  Someone on an average wage would benefit by €800.  However, it’s bonanza city for those on €100,000 and more.  Calculations for €36,000 and higher are my own.

There is a similar regressive impact when considering couples.   Renua states that a couple on €50,000 (both working, same salary) would gain €1,665.  A couple on €100,000 would gain €9,741 – or more than six times the nominal amount.  Couples on even higher incomes would benefit disproportionately more.

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‘Butskellism’ versus Keynes and Marx

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This article originally appeared on Socialist Economic Bulletin on Wednesday the 7th of Oct

Economics of budget deficits

The debate is continuing on the purpose of government borrowing and the role of ‘balanced budgets’ – which was started by John McDonnell’s position of balancing the budget on current expenditure but borrowing for investment. This is not surprising given that economic policy has to be the core of the programme for a Labour government.

A thoughtful addition to the debate is this piece by Jo Michell in theGuardian, who asks for a real alternative to Osborne, which SEB has provided in relation to the Fiscal Responsibility Act. But an important misunderstanding should be clarified. That article argues that advocacy of a balanced current budget over the business cycle would be to ’emulate Ed Balls and austerity lite.’ That is incorrect. It would only be the case if the level of government investment were maintained at current miserably low levels. Instead what is proposed here is a transformational increase in public investment, sufficient to foster a sustained recovery led by public investment. Far from this being ‘austerity lite’ it makes state driven investment a key to economic policy – entirely unlike the policy of Ed Balls.

The piece below examines this attachment to persistent government budget deficits, which have been combined with a simultaneous long-run decline in public investment.

The position on Osborne’s proposals that a Labour government should balance the budget on current expenditure over the business cycle but borrow for investment is set out in an earlier article here. It follows from the fact that the purpose of economic policy is, or should be, to optimise the growth in the sustainable living standards of the population. Increasing living standards requires growth – internationally over 80% of increases in consumption are due to economic growth. Since it is not possible to increase the fundamental productive capacity of the economy without investment, investment is the decisive factor in producing growth (in an overall framework of increasing the division/socialisation of labour). Therefore economic policy, including fiscal policy, should aim at increasing investment and gradually enhancing the proportion of output devoted to investment. This is the precondition for more rapid growth – ‘growing the economy out of the crisis’ as John McDonnell and Jeremy Corbyn put it. Borrowing should primarily be confined to investment, only resorting to support consumption in specific exceptional circumstances – such as to maintain living standards of the least well off sections of the population during economic downturns. Social protection should be financed via taxation – levied in a disproportionate way on the richer sections of the population.

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Housing Without Profit, People with a Home

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The following is based on a talk I gave to the housing conference held on Saturday: ‘Towards a Real Housing Strategy’.  There were excellent contributions from academics, activists and victims of the housing crisis.  The contributions from Dr. Lorcan Sirs (DIT), Dr. Sinead Kelly and Dr. Mick Byrne (both from Maynooth) were particularly provocative, as were many others;including Fr. Peter McVerry and Dr. Rory Hearn.

The current model of 100 percent local authority provision of social housing is no longer capable of meeting the new challenges – not only because of future fiscal restraints and competing demands from other sectors – health, education, social protection, economic infrastructure, etc.  Future social housing provision will need to accommodate low and average income households – something which the private rental sector will struggle with, especially as transnational landlords, inward foreign investment and up-market accommodation are squeezing so many out.

This requires a new public sector-led model to adequately house a larger section of society and ensure that rents do not become a burden on the productive economy. 

There are three principles that can inform this new model:

  • It is not-for-profit (cost rental)
  • It blurs the distinction between the ‘social’ and the ‘private’ so that the not-for-profit housing leads and eventually dominates the entire rental sector (unitary market)
  • It reduces the impact on public finances (off-the-books)

This will, in the first instance, require new housing providers. 

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Initial Thoughts on the Results of the Greek Elections and Lessons for Ireland

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The Greek Elections’ Results

The number of the people that did not vote is the largest one in the elections history so far. This is to do with the capitulation of Tsipras, and the enforcement of the left TINA, as well as with financial restrains for the voters that had to travel.

Syriza’s victory was not based on ‘hope’ or any expectations for a more socially just governance. It was a personal victory for Tsipras, which tapped into the emotional “he’s a good kid, the EU were hard on him, at least he negotiated hard” on one hand, and the more moderate, centrist “Now that he got rid of the left burden, he will be more sensible and the government will be more stable” on the other. The new left TINA, in particular, played a role in reversing the radicalisation of large groups of the Greek population (especially the young, and working class urban areas), and appealed to the collapsing middle classes. “Stability” has entered Syriza’s vocabulary.

Tsipras’ victory was also based on the ideological and organisational defeat of the left alternatives. KKE’s stance in the memorandum sounded like a broken clock that tells the time correctly twice a day, but they failed to support and express the OXI. LAE (Popular Unity) ran for the elections attempting to express the OXI, while at the same time attempting to revive Syriza’s -in my view bankrupt- programme. However, their focus was on humourous TV spots, rather than the programme itself and the fact that it was mostly a party/front of prominent ex Syriza MP’s that have not addressed what their role in the Syriza government was turned a lot of people off. Antarsya-EEK, going through a split (with ARAN and ARAS siding with LAE), got a few thousand votes more than they did in the January elections. However, their programme needs to be substanciated. It also has not reached the wider population (partly due to the small organisation and lack of access to the media) and they failed to present it in detail. In this sense, Antarsya is seen as a useful force for the struggles, but not good enough as a parliamentary force.

A separate mention to the declining votes of Golden Dawn is necessary here. Golden Dawn did not manage to grow in an environment, which is characterised by disappointment on one hand, and the refugee crisis on the other. Even though their votes were higher than last elections on the Islands of Kos and Lesvos, they were not significantly higher and they were mostly votes that came from other right wing parties, such as New Democracy. It is also important to stress that dispite their attempts they have not managed to build a fascist movement on the streets as their presence, on those islands too, is very limited and they are outnumbered by the activists standing in solidarity with the refugees.

In all, the 2.86% (155000 votes) of LAE. the rise of votes to Antarsya-EEK (by 4200 votes), as well as smaller maoist and troskyist parties, such as the ML KKE-KKE (ml) coalition and OKDE, and the stability in the votes of KKE would not allow anyone to say that the Greek left is dead and buried, far from it. This is evident especially in comparison to the losses of votes for Syriza, and the establishment parties. Syriza lost 320000 votes, while New Democracy lost 192000,To Potami lost 151000, Golden Dawn 8800.

Regardless of the voting outcome, I believe, discussions and other collaborative efforts from a movement-building perspective between LAE and Antarsya-EEK and other anticapitalist organisations-parties will take place the following period, as the struggle against the 3rd Memorandum will start unfolding.

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The Desert of the Irish Debate

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There is an old American saying:  if you have nothing to say, wrap yourself up in the American flag and recite the constitution.  In Ireland, today, if a politician, a political party, has nothing to say, no new ideas to advance, then call for tax cuts.  The current deluge of leaks in the media about impending tax cuts are not evidence of sources having something to say; it is evidence of how the debate over future economic and social strategy has been turned into a desert.

And what tax is being hammered?  The most efficient, transparent, potentially progressive tax we have – a tax that even an army of accountants acting on behalf of the rich can’t get around:  the Universal Social Charge.  It is called a hated tax, an unfair tax, an anti-entrepreneurial tax.  Everything that is wrong with our income tax system is blamed on the USC whereas the reality is that the USC has the potential to repair much that is wrong with our income tax system, distorted and misshapen by the myriad of reliefs, allowances and exemptions – most of which benefit high-income groups.

People have been put under pressure from the tax increases during the period of recession.  It was irrational to reduce people’s take-home pay when economic growth was falling, wages were being cut in real terms, working hours and income supports (e.g. Child Benefit) were being cut.  Between 2008 and 2012, the effective tax rate rose by 30 percent.  This was a major contributor to lengthening and deepening the recession.

Today, however, the issue is not ‘high taxation’; it is that people’s living standards are low by EU-15 standards.  The debate over cutting taxes, however, shows how incapable political parties are of addressing this issue.  Rather than admit intellectual impotence, they propose tax cuts – which will only exacerbate the very problems they are incapable of addressing. 

Tax Cuts:  Giving More to Those Who Have More

Ireland has one of the highest levels of market inequality in the OECD.  As the recovery becomes embedded we are in danger of accelerating this trend.

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JmcD

The need to clarify the left on budget deficits – confusions of so called ‘Keynesianism’

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This article was originally published in the Socialist Economic Bulletin on Monday, the 14th of September.

John McDonnell, the new Shadow Chancellor, has created something of a stir by his firm opposition to budget deficits to cover current expenditure – writing ‘let me make it absolutely clear that Labour under Jeremy Corbyn is committed to eliminating the deficit and creating an economy in which we live within our means.’ The so called ‘Keynesian’ left has attempted to make a point of defending budget deficits, presenting this as a hallmark of the left. These latter views are politically damaging because they are economically false. Neither do they derive from Keynes but from the confused views of academic pro-capitalist economics. John McDonnell is entirely correct on this point to oppose borrowing to cover current expenditure over the course of the business cycle.

The following article, originally published as ‘A damaging confusion in Western economics books – which followers of Keynes and Marx should correct’ deals with this issue from a fundamental economic point of view. A more comprehensive treatment of the issue, presented in a less technical fashion, can be found in my article‘Deng Xiaoping and John Maynard Keynes’.

Hopefully John McDonnell’s firm stance on the budget deficit will help the left to adopt the positions of Keynes and Marx and abandon the confused ideas on budget deficits that were wrongly presented under the name of ‘Keynesianism’.

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jc

Could We Have a Little Bit of that Corbynomics Over Here?

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Jeremy Corbyn is now leader of the British Labour Party.  A Sunday Times article likens Jeremy to Caligula – an insane, murderous tyrant who appointed his horse Consul.  According to the Tories, he is a threat to Britain’s national security, economic security and, well, galactic security (watch out for those Corbynite Klingons).  Well, at the risk of Roman despotism and an alien invasion force landing on the Blaskets could we please have a little bit of Corbynomics here in Ireland?

For at the heart of Corbynomics is something quite modest:  a modernising investment drive to re-tool the UK economy.  It is a testament to the perversity of a debate that investing in high-speed broadband, public transport, social housing, school and hospital construction, green technology can be labelled as extremist.  Does anyone really suppose that British businesses would be outraged if they had a world class broadband system?  Or that the economy would dive into the abyss if more energy came from renewable resources rather than fossil fuels? 

Maybe the extremism comes from other aspects of Jeremy’s proposals.  Renationalise the railways and energy companies?  Yeah, so extreme that even a majority of Tory voters support renationalisation.  Combat multinationals’ aggressive tax planning and avoidance?  Yeah, forcing companies to pay taxes like the rest of us.  Build low-cost housing in London?  I’m sure tenants would be up in arms.  Everywhere you look in Corbynomics, you see common sense. 

Even orthodox commentators would seem to agree:

‘It is hard to exaggerate the decrepitude of infrastructure in much of the rich world.’

So begins a provocative article in the Economist, not noted for alarmist language.  It points out:

  • One in three railway bridges in Germany is over 100 years old,
  • So are half of London’s water mains.
  • In America the average bridge is 42 years old while the American Society of Civil Engineers rates around 14,000 of the country’s dams as ‘high hazard’ and 151,238 of its bridges as ‘deficient.

Such a state of affairs is not only highly inefficient, but potentially very dangerous.

Public investment is well down throughout Europe, the US and Ireland.

Corbynomics

Almost all EU countries have significantly cut their public investment budgets – especially those countries that needed it most:  the poorer Mediterranean countries, Ireland, Romania. 

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The €2 Billion Start

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Today, Unite has published its 2016 pre-budget submission.  You can read the full submission here and the summary here.  In short, it calls for a €4.8 billion budget package comprising a €1.9 billion increase in expenditure on public services and social protection, a €550 million increase in public investment and focused tax reductions on the low paid (e.g. reform of the PRSI step-effect, refundable tax credits and indexation) worth €220 million.  This is to be paid for by tax increases on wealth and capital, along with increases in the social wage (employers’ PRSI) and the fiscal space allowed under the EU fiscal rules.

However, I want to focus on one particular proposal in the submission:  the temporary, once-off investment programme of €2 billion for social housing; in particular, focusing on the homeless and households with special needs.

This has been discussed previously on this blog.  Back in April 2014 I suggested that instead of the Government spending €7.1 billion on paying down debt, it should invest half of this into a special once-off investment programme in social housing.  The actual turnout for 2014 was €5 billion used to pay down debt.  At that time I wrote:

‘Let’s start with the conclusion: if by this time next year if there are people still homeless, it’s because the Government made a policy choice.  And the policy choice was to tolerate homelessness.’

Back in May 2014 Fr. Peter McVerry warned of a ‘tsunami of homelessness’:

‘In all the years I have been working with homeless people; it has never been so bad. We are, even I would say, beyond crisis at this stage.’

16 months later the situation has become worse. 

A comprehensive housing programme, one that addresses the myriad of issues such as homelessness, local authority waiting lists, rising rents and limited supply, house prices, planning, land prices – this is a big, big subject and is not amenable to sound-bite policies.  It will require joined-up strategies, long-term thinking and the intellectual courage to go beyond the ‘housing as just another market good’ thinking that dominates policy-making.

However, with winter coming on and more people becoming homeless, sleeping rough and / or living in wholly inadequate accommodation, we need short-term stop-gap remedies.  That’s the thinking behind Unite’s proposal for a €2 billion once-off investment programme – to address this immediate crisis. 

There are any number of options open to the Government in using this €2 billion:  fast-tracking refurbishment, acquisitions of short-term tenancies, conversion of idle buildings, extensions of current emergency accommodation, etc.  The key is that accommodation can be brought on stream quickly and efficiently.  One hopes that it is not too late.

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Reflections on Irish Water

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Despite its small size, the Emerald Isle, situated between England and America, boasts more than 12, 000 lakes, or loughs. The largest lake in the British Isles, Lough Neagh, is in Northern Ireland, reputed to be formed when the sod of earth that Fionn MacCool dredged up to throw in combat at a fellow giant, displaced water inland from the Irish Sea.

Lough Corrib and Lough Mask contend for first place in the Republic. Strangford Lough, a bird sanctuary, and Lough Hyne, a Marine Nature Reserve, are both sea-water lakes. The rest are regularly refilled by famously high levels of precipitation that seep into the ground. An abundance of streams and rivers are also found. No other country in Europe contains more bog-land. Twenty per cent of Ireland’s territory once consisted of bogs.

Ireland is completely surrounded by water. It is divided from Britain and Scotland by the Irish, or Manx, Sea, containing the Isle of Man, Anglesey and other islands. The Irish Sea meets the Atlantic Ocean, lapping remaining shores, through the North Channel, or Straits of Moyle, facing Scotland. It meets the Celtic Sea at the southerly St. George’s Channel, stretching out to France.

The copious rainfall irrigates the land to grow vegetation decked in forty shades of green. The temperate oceanic climate keeps the weather mild and moist, preventing temperature extremes. The North Atlantic Current flowing nearby bestows the year-round advantages of an ice-free coastline, and warmer temperatures than are enjoyed in other places on the same latitude. There are between 151 and 225 recorded wet days, receiving more than 1mm of rain, out of every 365 days of the year, with most falling in the west. Ireland is not short of water.

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E_K

Einstein’s Socialism

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Einstein’s progressive views inevitably made him face the fundamental in our times question of socialism. He dealt with it in his extremely important article “Why Socialism?”1, published in the first issue of Monthly Review in 1949. In it Einstein explicitly declares in favor of socialism, recognizing its superiority over the capitalist system.

Einstein came to be interested in socialism through realizing that the present social order does not promote culture and through his understanding of the deep despair and hopelessness experienced by many people. He recounts in the article an enlightening incident from a conversation he had with an acquaintance, who had expressed his indifference about the eventual destruction of humanity after a relevant remark by Einstein. He makes an accurate diagnosis of the social crisis: “Innumerable voices have been asserting for some time now that human society is passing through a crisis, that its stability has been gravely shattered. It is characteristic of such a situation that individuals feel indifferent or even hostile towards the group, small or large, to which they belong”.

From this starting point, Einstein came naturally to the question of the feasibility and the historical need of another, socialist order. And with his usual mental integrity, he replied it in the affirmative when he was convinced that there is no other way to save human civilization.

In “Why Socialism?” Einstein does not only sharply condemn capitalism. Even more significantly, he adopts, to a large extent, the Marxist analysis of the capitalist system, criticizing its exploitative character and its other derivative afflictions, such as the concentration of wealth in the hands of a few, crises, unemployment and the manipulation of public opinion. His judgments on the principle of profit and other currently dominant values of wild market capitalism are quite interesting

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Corbynomics and Crashes: Investment Versus Speculation

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This article originally appeared on Socialist Economic Bulletin on the 2nd of September

Words matter. But in economic discussion as elsewhere they are frequently abused. In economic commentary one of the most frequent falsehoods is to describe speculative activity as investment. Stock market ‘investors’ are in fact engaged in speculative activity. There is no value created by this speculation. The claim made by its apologists that it provides for the efficient allocation of capital to productive enterprises is laughably untrue in light of both recent events and long-run history. In fact, a vast number of studies showthat that there is an inverse correlation between the growth rate of an economy and the returns to shareholders in stock market-listed companies.

The chart below is just one example of these studies, Fig. 1. The research from the London Business School and Credit Suisse shows the long-run relationship between real stock market returns and per capital GDP growth. The better the stock market performance, the worse the growth in real GDP per capita. The two variables are inversely correlated.

The Economist found this result ‘puzzling’. But it corresponds to economic theory. The greater the proportion of capital that is diverted towards speculation and away from productive investment, the slower the growth rate will be, and the slower the growth in prosperity (per capita GDP).

Fig.1 Stock market returns and per capita GDP growth
 

This is exactly what has been happening in all the Western economies over a prolonged period. SEB has previously identified adeclining proportion of Western firms’ profits devoted to investment. The uninvested portion of this capital does not disappear. Instead, it is held as cash in banks and the banks themselves use this to fund speculation and share buybacks by companies (which simply omits the banks as intermediaries in the speculation). The effects of this are so marked that some analysts believe ‘financialisation’ is the cause of the current crisis, when instead it is an extreme symptom of the decline in investment and the consequent growth of speculative activity.

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No China’s economy is not going to crash – why China has the world’s strongest macro-economic structure

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This article originally appeared in Socialist Economic Bulletin on Tuesday, 1 September 2015.

A great deal of highly inaccurate material is currently appearing in the Western media about the ‘crisis’ of China’s economy – an economy growing three times as fast as the US or Europe. This follows a long tradition of similarly inaccurate ‘crash’ material on China symbolised by Gordon Chang’s 2002 book ‘The Coming Collapse of China’.

The fundamental error of such analyses is that they do not understand why China has the world’s strongest macro-economic structure. This structure means that even if China encounters individual problems, such as the fluctuations in the share market or the current relative slowdown in industrial production, which are inevitable periodically, it possesses far stronger mechanisms to correct these than any Western economy. This article is adapted from one published in Chinese by the present author in Global Timesanalysing the greater strength of China’s macro-economic structure compared to either that of the West or the old ‘Soviet’ model. The original occasion of the article was the next steps in the development of China’s next 13th Five Year Plan. The analysis, however, equally explains the errors of material currently appear in the Western media.

*   *   *

In October a Plenary Session of China’s Communist Party (CPC) Central Committee will discuss China’s next five-year-plan. This provides a suitable opportunity to examine the reasons for China’s more rapid economic development than both the Western economies and the old Soviet system.

Taking first the facts which must be explained, China’s 37 years of ‘Reform and Opening Up’ since 1978 achieved the fastest improvement in living standards in a major country in human history. From 1978 to the latest available data real annual average inflation adjusted Chinese household consumption rose 7.7%. Annual average total consumption, including education and health, rose 8.0%. China’s average 9.8% economic growth was history’s most rapid.

As China’s ‘socialist market economy’ achieved this unmatched improvement in human living conditions it is this system which must be analysed. Its difference to both the Western and Soviet models explains why China’s economic development is more rapid than either.

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Cameron’s Swarm is Europe’s Solution

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David Cameron labelled them a ‘swarm’. Thousands of them have died in the Mediterranean.  Border fences are being built to keep them out:  Hungary, Spain, Bulgaria, Calais.  The Slovakian Government will take a handful of them but only if they are ‘Christian’ (apparently they don’t do Muslims or Mosques).  And all the while millions are being spent  on aperverse mini-stimulus – as ‘defence contractors, outsourcing companies and security forces find willing buyers for their security-based “solutions”, bringing new surveillance systems, patrol vessels, co-ordination centres and detention facilities to the market with little scrutiny or due diligence.‘  A rational political and economic response gives way to militarisation.

This is what has been labelled the ‘migration crisis’ – as hundreds of thousands are seeking refuge, asylum, work and a better life while risking oppression and even their lives to come to Europe. 

Much has been written on this subject – including this insightful analysis by Dr. Vincent Durac.  I don’t intend to survey all the issues or appropriate responses as this crisis has many origins and dynamics and will require substantial doses of enlightened national policy combined with international cooperation.  But here are a couple of thoughts.

First, the men, women and children that make up Cameron’s swarm – they are not a problem, they are a solution.  They are a solution to Europe’s ageing demographic, skill base and employment crisis.

A key part of this is the fact that Europe is growing old.  Using the EU’s main scenario demographic projection, we see that the EU’s total population will rise by 17 million while the number of over 65s will rise by 54 million.  Working age population will fall by 34 million.  12 of the 28 EU countries are actually projected to experience an overall fall in their populations.  With a higher proportion of elderly and a falling number of working age men and women, Europe is set to suffer a slow age crash.

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