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Making Work Pay Requires More Social Protection Expenditure

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What are we to make of the two headlines this morning?  First, from the Irish Times:

‘Work pays better than welfare for most unemployed, ESRI finds’

And then there’s this from the Irish Independent:

‘Why families are better off staying on social welfare’

Both stories refer to a study that will be launched today by ESRI researchers, using the institute’s Switch tax-benefit model that allows a detailed examination of households’ financial situation both in work and out of work.  I will be going into more detail once this report is published but in this post I want to address a broader narrative: namely, to ‘make work pay’ requires more social protection spending and more public intervention into key markets.

The Irish Times reports two findings:

  • Nearly six out of seven people would be financially better off in work than on welfare (or nearly 85 percent)
  • Among those people in employment or unemployed facing a situation where work pays less than welfare, more than 70 per cent chose work rather than welfare.  So much for ‘life-style’ choices.

The Irish Times report goes on to state that:

‘The finding appears to debunk the myth that Ireland’s relatively generous social welfare system gives no incentive for people to work.’

Of course, we don’t have a relatively generous social welfare system but that’s another story.

The Irish Independent, however, focuses on the small numbers who would be better off on social protection.  They report that 45,000 workers would not receive any benefit from taking up work, of which 22,000 would actually lose money.  However, even the Indo report admits that most people still take up work, regardless of the financial impact.

So to the degree that people are not better off taking up work, what is the reason?

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Basic Income Summer Forum

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This article originally appeared on Ian Maleney’s Tumblr page, Interstate808.

On Saturday afternoon I attended the first half of the Basic Income Ireland Summer Forum in Dublin. I went along for the talk by Yannick Vanderborght, a leading campaigner for Basic Income in Europe. He spoke for about forty-five minutes or so, just giving a brief overview of the theoretical and political sides of the argument for and against Basic Income. Unfortunately I couldn’t stick around for the discussion afterwards.

The first part of the talk related to the “theory” side of Basic Income, the justifications for it and challenges to it, and it’s on this part that I would like to focus here. There’s plenty of information available online about the political side, with organisations all over Europe (and further afield) all engaged in pursuing the BI agenda and attempting to raise awareness for it. The Basic Income Earth Network is a good place to start.

Vanderborght outlined three main challenges to the idea of a Basic Income Guarantee.

—The Migration Challenge:

This argument says that any state that enacts Basic Income would instantly become a “welfare magnet”, attracting huge numbers of migrants looking to avail of it. EU law says that each EU state is required to provide social security to any EU citizen resident there. So, if Ireland were to enact BI, any citizen from any EU country could come here to live and the state would have to provide them with the same BI as they would someone born here. The argument suggest that such potentially high inward migration would make the scheme unfeasible.

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The Long Term Deceleration of the US Economy

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This chart shows the dominant long term trend in the US economy – gradual deceleration. A 20 year moving average is used to eliminate all cyclical or short term trends. The deceleration from 4.4% in 1969, to 4.1% in 1978, to 3.5% in 2002, to 2.5% in the first quarter of 2014 is clear. The temporary recovery in the late 1990s and beginning of the 21st century proved unsustainable and was followed by a sharper fall.

This trend shows that the most enduring feature of the US economy, which must be explained by any analysis, is not any analyses of business cycles, particularly those of a ‘manic-depressive’ type, but this very long term slowdown of the US economy.

Furthermore, as this deceleration has been going on for 40 years, it clearly has extremely deep roots which are very difficult to reverse. Unless dramatic changes in US economic policy take place, therefore slow deceleration should be built into projections for the US economy.

AnnualUSGDPGrowth

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The Cost of Our Health

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Do we spend too much on healthcare?  The EU Commission seems to think so.  In their country-specific recommendations for Ireland they state:

‘Even though Ireland has a relatively young population, public healthcare expenditure was among the highest in the EU in 2012 at 8.7% of GNI, significantly above the EU average of 7.3%.’

The implication is that our spending on healthcare is 16 percent above EU average levels.  What more justification does the Government need to continue cutting our health services than to get a recommendation from the EU?

There’s only one problem.  The EU Commission numbers are wholly unreliable and not a proper representation of health spending in the EU.

Before getting into the EU numbers, let’s see if we can discover just how much Ireland and other EU countries spend on health care by referring to the OECD’s Health at a Glance.

There are two measurements that can be used; first, health spending as a proportion of economic output.  The latest year they have data for is 2011.  To compensate for the fact that GDP is not a good measure for Ireland, I have used the Irish Fiscal Advisory Council’s hybrid GDP which measures fiscal capacity.  This hybrid measurement stands between GDP and GNP.

healthEx1

Ireland is just below the average expenditure of other Advanced European Economies (i.e. EU-15) – but there is a major caveat which I will refer to below.  It should be noted that if we used a straight health spending as a percentage of GDP, Irish spending would be 8.9 percent of GDP.  Of course, benchmarking any expenditure against GDP has its problems, especially when a Government has been pursuing austerity policies that actively reduce the GDP.

For an alternative view, we can turn to the OECD’s measurement of healthcare expenditure per capita, using purchasing power parities to account for differences in currency and living standards.

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What Can Come of the Leftward Movement in the Irish Local and Euro Elections?

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The left are on the march in Ireland since the local elections. Irish people and Irish political culture is slowly changing. The old description of Whyte (1972) that Ireland possesses a politics ‘without social bases’ is coming to end. Class politics has started to arrive and the old ‘two and a half’ Irish party system, with the demise of Labour, is no more. These developments present real opportunities for the left in Ireland and for the people who have been oppressed by austerity. In this context, this article attempts to factor in the gains on the left and predict the future at the next election.  This is done to see whether at last we can have a progressive left-dominated government which can prioritise public services, workers, the welfare state and offer fairer taxes, and other progressive measures that this left government would bring.

Dr Adrian Kavanagh has been doing some excellent work in recent times examining opinion poll data since the FG/Labour government came to power in February 2011. Also, Tom Louwerse’s analysis, which calculates the average across all opinion polls from April 1st 2011 to April 1st 2014 is very useful. Reading off the approximate values from the Louwerse graph (politicalreform.ie), the analysis suggests that constant first preference party support is as follows:  FG (25%); FF (22%); SF (18%); Labour (8%); other parties/Independents (20%); Greens (3%).

The European elections indicate the following first preference party support levels: FG (22%); FF (22%); SF (20%); Other parties/Independents (30%); Labour (5%).

The final result for the Local Elections shows the following first preferences: FF (25%); FG (24%); Other Parties/Independents/Greens (28%); SF (15%) and Labour (7%).

Adrian Kavanagh uses a model to predict the number of seats that first preference votes would give to each party and he does this for all the final national opinion polls produced in the weeks prior to the Local and European Elections 2014. His analysis is based on this RTE commissioned ‘poll of polls’ of May 21st, 2014.

This gives the following breakdown: FG (24%); FF (22%); Labour (7%); Independents/Other Parties and Greens 26%.

Corresponding to this ‘poll of polls’,  Kavanagh predicts the number of resultant TDs in the Dail if a general election was held, as follows: FF (38); FG (45); Labour (2); SF (32); Independents/Other Parties/Greens (41).

I have analysed the ‘Independents & Other’ TDs (which includes left parties such as SP and PBP which opinion polls still categorise as ‘Independents/Others!) in the current Dail, as follows:

Currently there are 28 in total at this point. Of these 28 TDs, 11 come from mainly FG gene pool, that is, supporters of Lucinda Creighton, with the remaining being ex FF or PD.

However, the majority of the 28 seats, 17 in total, are from a ‘left’ leaning/ ‘people power’ gene pool in terms of their political philosophy. These include: Tommy Broughan (ex Lab); Joan Collins (People Before Profit); Clare Daly (Ind Left); Stephen Donneely (Ind); Luke Ming Flanagan (Ind); John Halligan (Ind); Finian McGrath (Ind); Catherine Murphy (Ind);  Ruth Coppinger (SP); Maureen O’Sullivan (Ind); Tom Pringle (Ind); Shane Ross (Ind); Roisin Shortall (ex Lab); Mick Wallace (Ind); Richard Boyd Barrett (PBP); Seamus Healy (TUAG); Joe Higgins (SP).

If we assumed that these 28 existing TDs were to get re-elected next time, which is not too unreasonable, then Kavanagh’s analysis suggests that at least a further 13 ‘Independent/Other TDs will also be elected at the next general election.

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

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Housing Action Ireland

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

Housing Action Now

in The Teachers Club Parnell Square

On Thursday June 12th 2014 at 6pm.

Screening of the 15 minute film Scattered by Joe Lee

and O’Devaney Gardens Residents and Workers.

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

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

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Economics and the Debate on Immigration II

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This article was originally posted on Socialist Economic Bulletin on the 6th of June.

The now notorious UKIP poster which suggested the entire population of the EU might come to Britain for work is designed to whip up racism. But it contains two fallacies that are unfortunately shared by many people who are not racists, and are therefore worth rebutting.

Myth 1
The first myth is that Britain is a uniquely attractive place within Europe in terms of pay or workers’ rights, or social security entitlements. The graphic below was produced by the UNITE union in Ireland in their argument for higher pay. But it is such a good graphic it is worth reproducing as it stands.

Graphic 1. Private Sector Hourly Compensation in Western Europe, € PPPs

Graphic 1. Private Sector Hourly Compensation in Western Europe, € PPPs

Compensation includes both pay and social wages such as pensions and other benefits. The data is in Purchasing Power Parity terms, so that they account for price differentials between European countries. The data is drawn from Eurostat database here.

The compensation for British workers is among the lowest in Western Europe. Britain is not a uniquely attractive destination for economic migration within the EU. Therefore it should come as no surprise that Britain has one of the lower levels of immigration of the Western European economies.

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Basic Income – An Idea Worth Exploring

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Basic Income is being discussed more and more.  It will be discussed at this weekend’s Basic Income Ireland seminar.  Basic Income is a weekly payment from the state to every resident without any means test or work requirement – a payment sufficient to afford a decent living standard.  It would work like this:  I receive a weekly payment from the state of approximately €200 per week (if that’s considered to afford me a decent living standard) whether I work or not.  Any income I earn above that is taxed.  If I choose not to work I still receive the €200 weekly payment.   In essence, BI breaks the link between work and income.

There have been considerable criticisms.

First, it has been dismissed on grounds of cost.  It certainly would be expensive, requiring very high tax rates on income from work.  Tax rates of 40 to 50 percent on all income have been proposed to pay for the programme.  And given the need to fund public services, additional social protection payments and investment it is hard to see how this could be introduced in the short-term.

Second is the impact on the labour market and work behaviour.  In short, if you give everyone an adequate income would they choose not to work?  This could create labour shortages in key sectors which would hamper growth and undermine the ability to fund BI.

Third is the inflationary impact.  Boosting incomes could put pressure on prices and drive up imports which in turn would require increasing the BI as it struggled to maintain value.  This could result in an inflationary spiral (of course, we could do with a little spiral to get us out of this deflation).

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Sewage Babies

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Put on our Sunday best for Mass.

Let on we haven’t heard

about dead babies in Tuam.

Eight hundred infants,

bunkered in human filth.

Bones tossed like old coins,

dump of dead currency.

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To those who defend

servants of God and state:

‘They did the best

with what they had.’

What have we?

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Garrison church.

Proud, complicit government.

Blessed well of

indifference.

White

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Same Same but Different

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Book Review: Event, Slavoj Žižek; The Most Sublime Hysteric, Slavoj Žižek and Hegel and the Art of NegationAndrew W. Hass 

Event, Slavoj Žižek (Penguin, 2014)

A difficulty in reading Žižek is that he often seems to be juggling with too many balls, making dizzy the reader who tries to track the course of a single idea as it speedily travels from one page to the next before somersaulting in a paragraph. The challenge is not in grasping the idea but in following it amidst the inflections and involuting digressions. The whole asymptotic shebang can become just too much and the exasperated reader is tempted to close shop on the whole act by slamming the book shut.

What makes Event easier to read and follow through from start to finish is that this time one of the balls is bigger and more brightly coloured than all the others. The reader can keep this master ball in focus, safe in the knowledge that the smaller ones circulating with it are all derivatives, examples or reduplications of the one defining conceit: Event.

Ordinarily an event is just something that happens but with an Event something is realized in a way that is extraordinary. Rust Cohle in True Detective is far from being an ordinary police officer because of how he actualizes and fully realizes, in a Platonic way, the Idea of the detective.  For Plato, everyday empirical reality is a pale shadow of the bright and substantial reality of Ideas, an originary and eternal order not to be confused with the fleeting world of appearances. DunmanusBay that I see outside a window, and every other bay that anyone ever sees, only participates in the Idea of Bay by virtue of being a surface copy. Žižek gives Platonism a twist by saying, yes, there are absolute Ideas but they realize themselves purely in appearance. Rust Cohle, in the pursuit of his investigation embodies what it authentically means to be a detective, he enacts the truth that belongs to the concept of detective and in him the Idea of detective shines in all its purity. The essence that he embodies is there, unhidden in the material reality of his behaviour. In Hegelese, the distinction between appearance and essence is inscribed within appearance – because appearance is all there is.

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June Issue of Socialist Voice Out Now!

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June issue of Socialist Voice is out now   It can also be view/downloaded at

http://www.communistpartyofireland.ie/sv/index.html

Contents

  1.     A changed, and changing, political landscape [EMC]
  2.     The re-emergence of dark forces [TMK]
  3.     EU election shows up core-periphery divide [NL]
  4.     Government proposals on the “right to bargain” [NC]
  5.     The class war intensifies [TMS]
  6.     Spain moves to the left [TMS]
  7.     Solidarity with the Communist Party of Ukraine
  8.     Welcome to the new Ireland [NOM]
  9.     The compliant state [NOM]
  10.     Léirmheas: Tomhas maith ar Bono [CDF]
  11.     Films: Humanity and humour [JF]
  12.     Poems from Strabane
  13.     Frontier Soil


1.   A changed, and changing, political landscape

The election results have produced a changed and changing political landscape. There was a solid rejection of “austerity” by hundreds of thousands of working people throughout the country, with both Fine Gael and the Labour Party suffering heavy losses. The Labour Party has paid the heaviest price for its opportunism and its active support for anti-worker policies.

2. The re-emergence of dark forces

In Ireland we are often so wrapped up with our own election dramas that developments abroad may be overlooked and their impact on us missed. The remarkable rise of Sinn Féin, coupled with the equally spectacular plunge of the Labour Party and its leader, has predictably mesmerised the Dublin media. North of the border, where the story from the ballot boxes has offered little change, attention focused on the titillating travails of the recently formed and already collapsing NI21 party.

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IMF’d & EU too?

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This Reuters report suggests that Angela Merkel is trying to get the IMF’s Christine Lagarde installed as President of the EU Commission. Time to dust off this photo which is proving to be a little prescient.

“German Chancellor Angela Merkel has asked France whether it would be willing to put forward International Monetary Fund chief Christine Lagarde as president of the European Commission, two French sources briefed on the exchanges said.

German and IMF officials said Merkel had a private meeting with Lagarde during a visit to Washington in early May. They saw each other again in Berlin two weeks later when Lagarde attended a meeting of the heads of major international economic organizations hosted by the German government.

British Prime Minister David Cameron has led opposition to Juncker’s bid to succeed former Portuguese Prime Minister Jose Manuel Barroso, arguing that the EU needed new leadership committed to reform in response to voters’ dissatisfaction. London sees Juncker as an old-style European federalist.

British officials have made clear that Lagarde would be an acceptable alternative, as would center-left Danish Prime Minister Helle Thorning-Schmidt. Some British newspapers have campaigned for Lagarde to be given the role.”

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Dude, Where’s My Anglo-Irish Promissory Note Dividend?

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Remember back to the renegotiation of the debt repayments on the Anglo-Irish promissory note last year?  Amidst the sound of champagne corks popping we were told we would get a budgetary dividend of approximately €1 billion.  Overnight, our deficit was projected to fall from an estimated 3 percent in 2015 to 2.2 percent.  Less tax increases, less spending cuts.  Of course, we had to be quiet about all this – for fear of frightening the monetary-financing horses over at the ECB.  But what it meant was less fiscal pain.

So what happened to the dividend?  In short, it’s disappeared.   Under the latest Government projections, the deficit has quietly but firmly gone back up again.

ProDef

After the deal, the deficit in 2015 was projected to fall to €3,955 million (prior to the deal it was projected to be €5,325).  However, in the Government’s latest Stability Programme Update, the deficit has increased – back up to €5,235.  In percentage terms, the projected deficit yo-yoed – falling from to 2.9 percent of GDP to 2.2 percent after the deal, only to bounce back up to 2.9 percent.

So, instead of facing into a budget that needs to find €2 billion in fiscal adjustments, we should have only needed an €800 million adjustment.  And when you factor in the ESRI’s claim that, apart from water charges revenue, we wouldn’t need any more fiscal adjustments, then we should be facing into a budget where the Government could run expansionary policies (increase spending, cut taxes) and still meet the EU budgetary targets.

So what went wrong?

Three things happened.

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Greek EU Elections: A Clear, Historical, But Still Not Decisive SYRIZA Victory

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The Greek EU elections have produced what is clearly a historical result, not only for Greece but for the European Union as well. SYRIZA won by a clear margin of almost 4% (3.8% to be more precise), scoring 26.5% against 22.7% of ND, the governing right party. Moreover, in the municipal and regional elections SYRIZA gained an impressive victory in Attica district with Rena Dourou, though it failed to elect Sakellaridis in Athens, who lost by a small margin to Kaminis.

SYRIZA’s victory is widely discussed by the European mass media, together with Marine Le Pen’s impressive first place in France, as the two most striking and weighty EU elections results. But while important on a general level, SYRIZA’s success is even more important for the European Left. It is the first time in recent history of Western Europe that a party of the Left gains first place since 1984, when the Italian Communist Party had achieved the same, just after Enrico Berlinguer’s death. However, SYRIZA’s victory comes at a much graver occasion, when the specter of fascism, racism and reaction hangs heavily over the continent. In this connection, it is crucial in showing that there is another road for Europe apart from the turn to the ultra Right, observed not only in France but in several other EU countries (Austria, Denmark, Sweden, Hungary, etc.) as well.

Yet, precisely because it is historical, SYRIZA’s victory must be analyzed in a serious way and not be idealized or overestimated. This is not only because it was accompanied by a new rise of the neo-Nazi Golden Dawn party, but also because, if closely viewed, it points to some weaknesses of SYRIZA, without which it could have been even larger. Moreover, the Greek EU election results show some interesting tendencies with regard to the other parties as well, reflecting underground social trends which may be relevant for other EU countries too.

We will proceed therefore to a commentary of the Greek EU elections, hoping to highlight some of these aspects. But first of all let us give the results themselves (we also cite the May and June 2012 parliamentary elections results for the sake of comparison).

Party

%

Seats

May 2012

June 2012

SYRIZA

26.5

6

16.8

26.9

ND

22.7

5

18.9

29.7

Golden Dawn

9.4

3

7.0

6.9

Elia

8.0

2

13.2

12.3

Potami

6.6

2

-

-

KKE

6.0

2

8.5

4.5

ANEL

3.5

1

10.6

7.5

LAOS

2.7

2.9

1.6

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