Is Ireland really the role model for austerity? | Stephen Kinsella | Cambridge Journal of Economics

Abstract
This paper describes the causes and consequences of Ireland’s economic crisis in the context of the policy solution implemented to contain that crisis: protracted fiscal austerity. I describe the causes of the recent crisis in Ireland and look at the logic of austerity with a simple model. I compare the current crisis to the crisis of the 1980s, when fiscal austerity was touted as the trigger for the Celtic Tiger. I discuss the measures implemented to date in the current crisis, tracing their effects on sectors of Ireland’s macroeconomy. I show that Ireland is not the role model for austerity policies.

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The full content of the January 2012 issue of the Cambridge Journal of Economics is available free online here. It is a special issue on the theme “Austerity: Making the same mistakes again - Or is this time different?”

Contents
Making the same mistakes again - Or is this time different?
Lawrence King, Michael Kitson, Sue Konzelmann, and Frank Wilkinson

Financial crisis and global imbalances: its labour market origins and the aftermath
Pasquale Tridico

Dangerous interconnectedness: economists’ conflicts of interest, ideology and financial crisis
Jessica Carrick-Hagenbarth and Gerald A. Epstein

Commentary: Contradictions of austerity
Alex Callinicos

The great austerity war: what caused the US deficit crisis and who should pay to fix it?
James Crotty

The end of the UK’s liberal collectivist social model? The implications of the coalition government’s policy during the austerity crisis
Damian Grimshaw and Jill Rubery

Iceland’s rise, fall, stabilisation and beyond
Robert H. Wade and Silla Sigurgeirsdottir

Commentary: Dire consequences: the conservative recapture of America’s political narrative?
David Coates

A note on America’s 1920–21 depression as an argument for austerity
Daniel Kuehn

US government deficits and debt amid the great recession: what the evidence shows
Robert Pollin

Fiscal deficits, economic growth and government debt in the USA
Lance Taylor, Christian R. Proaño, Laura de Carvalho, and Nelson Barbosa

The tragedy of UK fiscal policy in the aftermath of the financial crisis
Malcolm Sawyer

Is Ireland really the role model for austerity?
Stephen Kinsella

The macroeconomic stabilisation effects of Social Security and 401(k) plans
Teresa Ghilarducci, Joelle Saad-Lessler, and Eloy Fisher

The basic paradigms of EU economic policy-making need to be changed
Kazimierz Laski and Leon Podkaminer

Building faith in a common currency: can the eurozone get beyond the Common Market logic?
Pascal Petit

The four fallacies of contemporary austerity policies: the lost Keynesian legacy
Robert Boyer

Russia: austerity and deficit reduction in historical and comparative perspective
Vladimir Popov

Commentary: Austerity and fraud under different structures of technology and resource abundance
Jing Chen and James Galbraith

The Newsfakers | Patrick Cockburn

I enjoyed this nuanced article by Patrick Cockburn about journalism, accuracy, modern media, blogging, black propaganda and the use of social media by authoritarian regimes and advanced capitalist ‘democratic’ ones too. It also reminded me of this excellent review of Net Delusion by Oliver Farry that we published a while back.

“So technical advances have made it more difficult for governments to hide repression. But these developments have also made the work of the propagandist easier. Of course, people who run newspapers and radio and television stations are not fools. They know the dubious nature of much of the information they are conveying. The political elite in Washington and Europe was divided for and against the US invasion of Iraq, making it easier for individual journalists to dissent. But today there is an overwhelming consensus in the foreign media that the rebels are right and existing governments wrong. For institutions such as the BBC, highly unbalanced coverage becomes acceptable.

Sadly, al-Jazeera, which has done so much to shatter state control of information in the Middle East since it was set up in 1996, has become the uncritical propaganda arm of the Libyan and Syrian rebels.”

Representation Without Taxation: Fortune 500 Companies that Spend Big on Lobbying and Avoid Taxes

A new report identifies thirty Fortune 500 corporations that pay less in federal income taxes than they spend on federal lobbying.

We identify the “Dirty Thirty” companies that were especially aggressive at dodging taxes and lobbying Congress. These companies so deftly exploited carve outs and loopholes in the tax code that all but one of them enjoyed a negative tax rate over the three year period of the study, while spending nearly half a billion dollars to lobby Congress on issues including tax policy. Altogether they collected $10.6 billion in tax rebates from the federal government.

Ordinary American taxpayers and small businesses must pick up the tab when major corporations avoid their taxes. Spread out over every individual tax filer in America, the taxes avoided by the Dirty Thirty break down to an average of $481 per taxpayer over the three years.

A total 280 profitable Fortune 500 companies collectively paid an effective federal income tax rate of 18.5 percent, about half of the statutory 35 percent corporate tax rate, while receiving $223 billion in tax subsidies.

These corporations include most of the Fortune 500 companies that were consistently profitable from 2008 through 2010. Collectively they paid $250.8 billion in federal income taxes on a total of $1,352.8 billion in U.S. profits. If they had paid the statutory 35 percent tax on their profits, they would have paid an extra $223 billion. There are thousands of perfectly legal ways that corporations, with the help of armies of high-paid lawyers and accountants, can reduce their tax burden

These 280 companies spent a total of $2 billion lobbying on tax and other issues between 2008 and 2010.

The report explains why exploiting offshore tax havens is an example of tax dodging at its worst and that at least 22 of the Dirty Thirty reported subsidiaries in offshore tax havens like the Cayman Islands. Since profit artificially shifted offshore is often counted as “foreign” profits, the data likely underestimates the amount lost due to tax havens.

World economy: where are we now? | Michael Roberts

The growth forecasts just published by the World Bank confirm Michael Roberts arguments that the world economy is not going to experience a double-dip recession, but will remain in what he calls a prolonged depression where growth is weak and unemployment continues to rise. The Eurozone, however, will fall into recession.  ”Capitalism is weak, but the patient is not having a relapse and going back into intensive care” he concludes.

The World Bank published its economic growth forecasts for 2012 and beyond today.  The bank has lowered its forecast for 2012 from its estimate back last summer.  Now it expects the world economy to grow at just 2.5% this year compared to 2.7% in 2011 and 4.1% in 2010.  So the recovery from the Great Recession of 2008-9 is beginning to slow down.  The bank’s forecast confirms that the world is not slipping back into a ‘double dip’ recession (see my post, Double dips, deficit and debt, 24 August 2011), but even so economic growth is so slow that capitalism is really in a long depression (see my post, It feels like a depression, 18 September 2011) where unemployment will continue to rise or, at the very best, stay at highs since the world collapsed in 2009.

When you break down the growth forecasts by region, the bank expects that the advanced capitalist economies of the OECD will grow just 1.3% this year, down from a poor 1.4% in 2011 and 2.8% in 2010.  There will be a small pick-up to 1.9% in 2013.   So by the end of 2013, the advanced capitalist economies will have grown by less than 2% a year in real terms on average since 2009, a rate that cannot restore jobs or losses in living standards from the Great Recession.

What Americans Keep Ignoring About Finland’s School Success | Anu Partanen

[You could easily replace "Americans" -- both in the title and throughout the article -- with "Ruairí Quinn" -- Tombuktu]

One of the hottest trends in education reform lately is looking at the stunning success of the West’s reigning education superpower, Finland. Trouble is, when it comes to the lessons that Finnish schools have to offer, most of the discussion seems to be missing the point.

[...]

Compared with the stereotype of the East Asian model — long hours of exhaustive cramming and rote memorization — Finland’s success is especially intriguing because Finnish schools assign less homework and engage children in more creative play.

[...]

So there was considerable interest in a recent visit to the U.S. by one of the leading Finnish authorities on education reform, Pasi Sahlberg, director of the Finnish Ministry of Education’s Center for International Mobility and author of the new book Finnish Lessons: What Can the World Learn from Educational Change in Finland? Earlier this month, Sahlberg stopped by the Dwight School in New York City to speak with educators and students, and his visit received national media attention and generated much discussion.

And yet it wasn’t clear that Sahlberg’s message was actually getting through. As Sahlberg put it to me later, there are certain things nobody in America really wants to talk about.

* * *

During the afternoon that Sahlberg spent at the Dwight School, a photographer from the New York Times jockeyed for position with Dan Rather’s TV crew as Sahlberg participated in a roundtable chat with students. The subsequent article in the Times about the event would focus on Finland as an “intriguing school-reform model.”

Yet one of the most significant things Sahlberg said passed practically unnoticed. “Oh,” he mentioned at one point, “and there are no private schools in Finland.”

Is Denis O’Brien All Balls and No Brain?

Question: Is Denis O’Brien a dynamic and succesful media entrepenuer who is willing to take daring risks and to justifiably reap the massive rewards. Or is he instead just another dumb f**k rip-off artist, like Sean Quinn, except with politicians in his pocket who thought he was impervious to failure when he borrowed millions from Anglo Irish Bank when it was close to collapse in order to fund a media takeover of an entity that was itself hemorrhaging cash? Answer at the end of this quote from yesterday’s Sunday Times article by Danny Fortson, some of which Broadsheet.ie has kindly brought beyond the paywall for us.

“His most painful investment has been Independent News & Media, whose stable includes the Irish Independent. Between 2006 and 2009 he built a 26% stake at a cost of more than €510m. During that period the group’s newspapers ran articles critical of him.

He engaged in a bitter wrangle over the company’s direction with Sir Tony O’Reilly, the long-time chief executive. O’Brien eventually won his campaign to force out O’Reilly, who retired in 2009.

Financially, however, the business was a disaster for him. The publisher was hit hard by the economic slowdown and in 2009 it was forced into a debt-for-equity swap that virtually wiped out investors.

O’Brien, still the biggest single investor, was left nursing a €500m paper loss. Worse, he would have to look elsewhere to repay Barclays Bank and Anglo Irish Bank, which funded the share spree.”

Answer: Yep, dumb f**k.

The Irish Economy. What happened? What next? | Talks at the Central Library, Ilac Centre, Dublin in March

A series of lunchtime talks taking place each Thursday in March at 1pm in the Central Library, ILAC Centre. The talk is part of a series of readings and discussions on the topic of the Irish economy. More specifically on recent political / economic history - how we have reached the point we are now at, what the policy of successive governments has been and what effect these policies have had.

March 1st: From independence to the IMF: the Irish economy and the forces that shaped it, 1922-2010
Conor McCabe (Sins of the Father)

March 8th: Austerity; time for a Plan B?
Michael Taft (notesonthefront.typepad.com)

There are more high earners than there were pre-recession and they are paying less tax | Colm Rapple

Colm Rapple’s most recent column finds something odd in a recent posting on the Revenue Commissioners website. The wealthy earned more in 2009 than in 2005 and paid less tax, and this was known before the budget yet the two ministers with responsibility for reducing costs or increasing taxation did nothing about it.

There is no obvious explanation for the sharp increase in the number of people declaring high incomes during the worst years of the economic downturn.   The number declaring incomes above €200,000 jumped from 12,620 in 2005 to 18,264 in 2009 while the number on more than €275,000 rose by almost a third from 6,358 to 9,294.

Those 9,294 taxpayers declared a combined income of €5,285 million and paid €1,676 million income tax. That was 15.8% of the total income tax collected that year and it represents an effective tax rate of 32%.

Imposing an extra income tax of 3% on those very high earners would raise €150 million a year while an extra 3% on all those earnings more than €100,000 would raise €540 million. That’s not far short of the €560 that the 2% VAT hike is expected to bring in this year. But unlike the VAT increase which will be regressive in its impact, taking proportionately more from those least able to afford it, an extra tax hike on those earning more than €100,000 would mainly hit those well able to bear the extra burden.

Netherlands “Universal” Health care insurance scheme has gone from a two-tier health system to a three tier health system | Dominic Haugh

Dominic Haugh has a very good analysis of Fine Gael/Labour’s FairCare “Universal” Health Insurance scheme which they’re proposing will transform Ireland’s two-tier apartheid health system into a single tier equitable one. It’s nonsense of course, as everyone knows that introducing an additional ‘cheaper’ insurer into a market with three existing private insurers will not lead to a more equitable system. It will lead to a further expansion of the privatization of health care, worsening outcomes for patient care and pointlessly increased costs and lower access as world-wide studies have repeatedly shown. Here’s Labour Party member Dr. Gerry Burke on FG’s plan in 2009. And its being discussed on Cedar Lounge where I filched Dominic’s report from.

Dominic’s analysis of the Dutch System that is the model for the Fine Gael plan was carried out for Conor Mac Liam, who was a Socialist Party/United Left Alliance candidate in Carlow/Kilkenny in the last General Election.

“Fine Gael claim that the introduction of Universal Health Insurance will eliminate the two tier public / private health system we currently have. However, in contrast to the above claim, the reality is that the Netherlands has gone from a two-tier health system to a three tier health system. All citizens are obliged to take out mandatory Universal Health

Insurance, but Voluntary Supplementary Health Insurance is also available at extra costs.

When the Universal Health Insurance was introduced in 2006 almost 92% of adults paid for Voluntary Supplementary Health Insurance.

As premiums have risen, the numbers purchasing Voluntary Supplementary Health Insurance have declined. Furthermore by the end of 2007, approximately 231,000 people were uninsured and a further 240,000 people were enrolled with insurance companies but were in default on their payments and upwards of six months in arrears.

So the effect of the introduction of Universal Health Insurance has not eliminated the two-tier system, but has actually created a third tier, those who are uninsured or are defaulting on their premiums. The Dutch Government has taken steps to deduct mandatory premium payments (and significant fines) directly from the wages and welfare payments of uninsured and defaulting people.”

Chart of the Day: Greek workers work 48% more hours than Germans

This chart illustrates what many will find to be counter-intuitive. The most recent data from the OECD covers 2008 and shows that in that year, Greek workers on average worked 48% more than their industrious German neighbors. The OECD data shows the average Greek worker spent 2120 hours at work compared with 1429 hours in Germany. Moreover, Greece is one of the only OECD countries in which workers were working longer in 2008 than in 1998. With 1802 hours at work, the average Italian employee spent more than 25% more time at work than the average German worker.

While many will be initially surprised by the data, on reflection it makes intuitive sense. In crude terms, wealthier countries typically work smarter-more capital intensively-than poor countries, not longer. Contrary to conventional wisdom, the lack of Greek competitiveness, for example, does not seem to lie in hours working but with the combination of productivity and wages/benefits (unit labor costs).