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Progressive Film Club Screenings: Sat 24th Oct

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Date for your diary – our next screening features a documentary from Mexico (Spanish with English subtitles) and a gritty feature film from Dublin.

Sat 24th October 2015
New Theatre · 43 East Essex Street · Dublin 2
3pmOut of Focus [2013]
San Fernando is no ordinary prison. In Mexico City’s most notorious juvenile detention centre, boys between the ages of fifteen and eighteen are serving sentences for serious crimes. When they are released after many years they have their whole lives ahead of them—but what then? “In my community and throughout Mexico,” says Cholo, “even around the world, as an artist I want to be known, not only as a thief and a loser.” As part of a film and photography workshop organised by the film-makers, the juvenile inmates’ hopes and dreams are artistically reflected in short stories, sculptures, songs, poems, and films. They tell of their experience with violence and crime but also of dealing with each other and the importance of friendship. ? Directed by Adrián Arce.? Running time: 37 minutes.

In the style of a bootleg VHS, Smolt is a unique portrayal of an eventful few days in the lives of Darren and Leon, two Irish lads who generally have to fend for themselves. While killing time selling second-hand cigarettes, the boys run into some trouble with a girl, a gun, and a shipment of counterfeit football jerseys. Smolt offers an intimate, visceral slice-of-life of two young lads in the concrete playground that is Dublin. ? Directed by Michael Higgins. ? Running time: 67 minutes.
See trailer:-

Admission is free – as usual.

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The Wake Up Call

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One of the more frustrating aspects about the budget season is that everyone is focused on the detail, the particulars; even more so when an election is looming.  The whole thing is backwards.  One should first start with a long-term programme.  Then we can see how the details of any particular budget serves that programme (or doesn’t).  No one is doing that.

Except the Nevin Economic Research Institute.  In their recent Quarterly Economic Observer, Dr. Tom McDonnell has produced an outline of such a long-term term framework and vision – a sustainable, prosperous and increasingly productive economy capable of raising incomes and reducing poverty.  It is rigorously argued and evidence-based and probably one of the best economic frameworks to emerge from the debate for some time.

This is not sexy stuff.  But it is the stuff of economic and social prosperity. 

Most of it all, it should serve as a wake-up call – not only to the Government but to progressives and trade unionists as well.  The programme is set out in Section 4 of theQuarterly Economic Outlook.  It is still in skeletal form; I understand that Dr. McDonnell will be producing a more comprehensive paper in late October.  But let’s go through some of the the headline proposals NERI is making.


  • Increase public investment
  • A new infrastructure bank to provide stable, long-term finance
  • Expert evaluation of infrastructural needs and specific projects (cos-benefit analysis)

This is a crucial area.  Think social housing, advanced-speed broadband, renewable energy generation, water & waste.  The Government’s capital programme released this week is a complete flop.  Investment will rise by €600 million over the next three years while tax cuts will cost €750 million next year. 

The emphasis on an infrastructural bank is intended to allow access to low-cost loans over the long-term, which works with the nature of infrastructural projects which have a long return horizon.  And we desperately need independent analysis of our infrastructural needs combined with publicly available and scrutinised cost-benefit analysis to ensure that we are getting value-for-money and that projects are economically viable, not politically expedient.

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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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Enough: Foundation for a Moral and Ecological Economics



How can we live in harmony with nature?  How can we eliminate poverty, provide security and create sufficiency for all the people of the earth?  How do we restore an ethic of care for people and for the earth?  In short, how can we put human and planetary well-being at the centre of all our decision-making?

At Basic Income Ireland (, we recently held a think-in on the links between a universal basic income and sustainability (understood as a sane, humane, ecological and just social economy). Participants identified a sense of enough as a necessary feature of any positive future, and a lack of a sense of enough was identified as a current barrier to progress in that direction. A huge amount of literature and practice exists concerning enough and this article points to some of them[i].

 The absolute reality is that we need to contain the economy and the kinds of work we do within the limits of the planet. Rich countries and wealthy inhabitants of poor countries are the worst offenders in all of these matters, since ecological footprint grows with income.  Economy must fit the planet via societies of sufficiency.  The big overall thrust must be to stop indeterminate and exponential growth, to direct economic activity towards human well-being within planetary limits, and to restore to some degree the health of the natural systems of our planet.

Sufficiency, sustainability and security are key needs of people and living systems all over the world, as we move into the rest of this century.  We also need maximum citizen participation, diversity, resilience and whole-system health.  This adds up to a different paradigm of progress and economic development.  Legislation, attitude and lifestyle will have to go hand in hand and will need to be centered on a moral and ecological principle that enough is plenty.

Public policies based on enough

Enough has important philosophical and reflective aspects, but it is also at the heart of many concrete proposals and frameworks for making the changes we need, in order to live well in the future.

One of the most important frameworks concerns a universal basic income, which provides sufficient cash for all people to have the basics for a decent life, regardless of whether they work for pay or not.  This proposal provides security for all in ways that means-tested social welfare cannot do. Personal security is a prerequisite for reducing economic demands to sustainable levels, and for creating a social and cultural climate where everybody is free to act on their moral and ecological concerns.  It also has the potential to contribute to general security and a global reappraisal of growth.

A basic income means that individuals are no longer dependent on jobs for their daily needs and are free to choose how they work.  At this time, our large, globalised, market-oriented societies structure our paid work towards environmental ruin, because work is how most people get money, no matter how soul-destroying or destructive that work is.  In work, we expend our time and energy and it has the potential to be hugely enjoyable and satisfying.  We all deserve and need the opportunity to structure our work – paid or unpaid – to be a force for good in the world.

Basic income would allow people to work shorter hours on the job, or in many cases to leave unsatisfactory or harmful jobs, and to be productive in society, in, for example, sustainable food-production, other community-economy activities, personal development, caring work and household production.  It would also support the individual members of the many activist and pioneering groups already engaged in practices and projects designed to transform economy and society.  Their work is often without pay, or, if paid, it is low-paid and precarious. 

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


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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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.


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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A New Horizon for the European Left


Ronan Burtenshaw argues that now is the time to start discussing alternative political and economic unions for Europe

2015 has been a year when a decade has happened for Europe’s Left.

In just a few months we have seen the election of SYRIZA, the unprecedented crisis in Fortress Europe and the election of Jeremy Corbyn as British Labour leader, not to mention the municipal victories in the Spanish state and the development of Right2Water into Ireland’s largest ever social movement.

Further developments are promised in the cascade of elections to come in Europe’s periphery.

But, as we welcome the opportunities that have opened up, we should acknowledge the paths that have closed. Most prominently, the defeat of the Left government in Greece has raised serious questions about the way forward for our growing movement.

One of the fulcrum points for this debate is the European Union, which was so important in determining the prospects of SYRIZA. Europe’s Left has been divided on this question for some time – the majority faction saw the EU as a site of struggle which could be won and turned to progressive ends, the minority saw membership of it as an insurmountable obstacle to anti-neoliberal strategy.

Both camps had valid bases for their position. The majority, which includes the leadership of most of Europe’s radical Left parties, argued that globalised capitalism could not be effectively challenged by a nation state. The minority argued that the European Union was irredeemably pro-capitalist.

In the end, the Troika used these two poles as a binary to entrap the Greek government. We now know that the price for remaining in the European Union and euro is accepting austerity and post-democracy. But the only alternative proposal has been unilateral exit and facing international capital alone. The Greek people, finding neither option attractive, are likely to punish the Left in the forthcoming elections.

But this binary – false internationalism or a return to the nation state as the only paths out of neoliberalism – is not only a problem for Greece. In the other states of the European periphery such as Ireland and Spain it places severe limitations on the prospects of growing left-wing movements. In Britain, with the new possibilities of a Corbyn Labour party, it creates a hugely problematic dynamic for the upcoming EU referendum, offering ideal ground for a narrow debate between the nationalist right and cosmopolitan neoliberals.

There is an urgent need for Europe’s Left to break this binary and construct a new horizon that seeks to transcend the limitations of the European Union and the nation state.

For this, we need a debate about alternative economic and political unions.

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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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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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September Edition of Socialist Voice Out Now

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September Edition of Socialist Voice Out Now

Much ado about nothing:  
The “peace process” in the North is going through one of what appear to be regular spasms, this time resulting from the killing of two men who the press claim were former members of the IRA in Belfast. The fall-out from the killing of Kevin McGuigan on the 12th of August rumbles on as a result of comments made by the chief constable of the PSNI, George Hamilton, which sowed confusion and provided the pretext for current developments…………

Lansdowne Road (the Haddington Road Extension)  
Alan Hanlon
This headline sums up the proposed Lansdowne Road Agreement. Brendan Howlin and union leaders have been making a lot of noise about pay restoration and the end of the so-called financial emergency. It has been hyped in the bourgeois yellow press that civil and public servants would receive a pay increase of €2,000 per annum under the deal.      Howlin and the Labour Party spin doctors have tried to give the impression that but for them the nasty Fine Gael party would have given nothing. This is nonsense. The Labour Party is a willing partner in the austerity programme.

Don’t privatise the banks?  
Nicola Lawlor
Very early in the present crisis the CPI argued against nationalising the banks, on the grounds that this would be socialising tens of billions in debts, would bankrupt the state, and would create conditions for a general downward restructuring of the economy. The party introduced and popularised the slogan “Repudiate the debt” as the clearest anti-imperialist class position, which attempted to challenge both the Irish establishment and the European Union and indeed the global financialised economy.

All is not quite what it seems:   
Tommy McKearney
According to an article by Hugh O’Connell on the web site, our now ailing and tetchy Labour Party leader has commissioned a company called Marmalade Films to produce a series of short social-media-based advertisements commending the party’s performance in government.1 These short film clips deal with the themes of jobs, families, and business, asserting that the Labour Party is good for all three, though offering little evidence to support the claim.

One step nearer to privatising schools    
Dónall Ó Briain
The national school on the island of Inis Meáin, Co. Galway, needs a second teacher—not because of the number of pupils (there are only nine) but because of the number of subjects to be taught. Up to now the solitary teacher has been expected to teach the whole national school curriculum.

Samir Amin: A life that continues to be lived:
Nicola Lawlor
Samir Amin is recognised as one of the most important and most inspiring living Marxist theoreticians and philosophers. I would strongly recommend that people read his regular articles in Monthly Review (posted on the MR e-zine) and his books, most notably his recent publications The Law of Worldwide Value (second edition, 2010) and The Implosion of Contemporary Capitalism (2013).

Reasons why I am not a capitalist
Richard Bryant
1. It is not the perfect system that it has been advertised to be. It had a beginning and a middle, and we are now at the end. It will not self-perpetuate into the indefinite future. The responsible solution is to search for alternatives not rooted in austerity and oppression.

The Pope calls capitalism’s bluff:  
Tomás Mac Síomóin
Pope Francis is no 21st-century Karl Marx. But when it comes to the critical analysis of modern monopoly capitalism and its role in the creation of human suffering on a massive scale, the Italo-Argentine and the German Jew sing from the same hymn sheet.

The case against the privatisation of water  

Paul Doran
Here are ten reasons—among many—why the privatisation of drinking water could spell doom for the Irish people and many of the world’s 6 billion-plus people:

No reproductive freedom in Ireland, North or South:   

Scarlett Hoy
The availability of safe, legal abortion and affordable, reliable contraception is really good for women. Being able to decide if and when to have a child (or more children) improves women’s educational outcome, our career prospects, our health, the health of our relationships, the well-being of our…….

Trade Union Campaign to Repeal the 8th Amendment:    
Therese Caherty
Abortion is a work-place, equality and human rights issue. Since its formation in September 2014 the Trade Union Campaign to Repeal the 8th Amendment has argued that this is the case.

Democratic Programme for the 21st Century:  

The Democratic Programme for the 21st Century is timely, not just in its connection to the many coming centenaries and memorials over the next number of years, kicked off with the recent O’Donovan Rossa events……..

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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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