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Unrealistic Timelines: Water Charges and the Fiscal Deficit

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During a recent debate on water charges, Minister Alan Kelly had this to say about Government policy:

‘I would go so far as to say that the timelines operating to date have been somewhat unrealistic, squeezing many years of work into too fine a condensed period of months.’

To which a reasonable policy response would be abandon the current timeline; in particular, the introduction of water charges.  If the timelines are unrealistic then, clearly, it is realistic to proceed with the charges.

However, an argument that has arisen in the last week is that if water charges were abolished, suspended, postponed, put in cryogenic freeze, whatever, it would have a negative impact on our deficit.  This arises because Irish Water is now ‘off-the-books’ for the purposes of calculating our deficit.  This means that, unlike in the past, expenditure in water services is not counted as government expenditure since more than 50 percent of its revenue comes from non-government services (i.e. household and business charges).   There is an exception to this which is discussed below.

So how much would it cost the state to get rid of the charges?  I have heard claims that it would cost an extra €600 million, €800 million, €1 billion and more.  Would it?

FF’s Micheal McGrath asked the Minister of Finance a pretty straight-forward question:

‘To ask the Minister for Finance the deficit in nominal and percentage terms which would exist in 2015 if domestic water charges were not applied, and the costs associated with water provision if brought fully back on to the State’s books.’

The Minister refused to answer the question or even offer an estimate.   So when you hear Ministers, backbench TDs and commentators going on about how much it would cost the state to get rid of water charges, just remember:  the Minister for Finance refused to tell the Dail how much.

[Also, SF’s Angus Ó Snodaigh also asked the same Minister Kelly ‘the amount it will cost to provide water and sewerage services in 2015’.  Again, no answer.  What does it take to get a direct answer to a direct question?]

Given the official silence on this issue, I went in search for the answer.  The PwC report on water services published in late 2011 stated that the cost of water services, which includes investment, was €1.1 billion in 2010.  Let’s assume some growth in spending, though during this period it could have easily been cut (Eurostat numbers show a steady reduction of expenditure since 2010 but they have a different method of categorising water expenditure so we can’t be sure if we’re comparing like-with-like).

If the cost of providing water services in 2015 is €1.2 billion, and the €533 million is ‘on-the-books’, then the Government will benefit by €667 million.  Therefore, if there were no water charges, then the deficit would rise by €667 million.

However, the Minister also stated that €233 million in revenue from non-domestic sources (does this refer to businesses?) counts as Government revenue which wouldn’t be the case with households.  I can’t say conclusively how this impacts but if given that off-the-books revenue must be at least 50 percent, and the Government has trimmed this to be as low as possible, we could be looking at a saving of only €300 million for the Government.

And the cost of the child-free water allowances will also count as government expenditure.  If the charges were abolished, so would this expenditure.

Is this clear?  No, but the Government has refused to answer straight-forward questions.  To complicate matters further the Government is intending to spend €223 million in an equity investment in Irish Water.  But if we just freeze the situation, this €223 million wouldn’t arise, so we shouldn’t allow this to be thrown into the pile.

So what have we got?  On a static basis:

  • If the savings to the Government were €667 million, then the deficit would rise by 0.3 percent.  The Government would still hit its 3 percent deficit target.
  • If the savings were €300 million, then the deficit would rise by only 0.1 percent – meaning the Government would come in comfortably below target (at 2.8 percent).

However, this is on a static basis.  One has to estimate three things:  first, with the removal of the water charges, consumer spending will rise, thus increasing GDP (for most people, every €1 not spent on water charges is likely to be spent in the domestic economy).  A higher GDP means a reduced deficit (as a percentage of GDP).

Second, tax revenue rises from the increased spending; this has a downward pressure on the deficit.

Third, social protection costs may fall if employment arises from this increased spending; again, putting downward pressure on the deficit.

Therefore, the Government would come in below their targets.  And that’s for 2015.  When you estimate the impact on the deficit for 2016 and beyond, it makes little difference to the deficit as it will be falling substantially.

If my estimates of costs hold then the Government will hit its fiscal targets next year and the following years.  I am open to correction – but the only ones who can do that are the Government and they aren’t telling.

The Government should call a halt to this mess called Irish Water.  It is a toxic brand that no amount of re-branding will save.  If the Government, as part of a panic measure to mollify the opposition, caps water charges until 2016, this could actually threaten the ability of the Government to keep expenditure off the books (never mind the whole conservation mojo). The Government would be imposing charges, but be unable to keep the spending off the books.  All economic pain, no fiscal gain.

Stop the mess.  Put the numbers out into the public domain.  Go back to the drawing board.

There are other, better ways to finance water investment, dis-incentivise wasteful consumption and fund a modern, state-of-the-art water and waste system.

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That Day has Come

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Dawn rises grey and slow

over Hill Side

reflecting silver shadows

on the black water of  Lough  Atailia.

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A metronome ticks in drips

as civil war fades

washed down the drain

with Irish water.

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Those who try to sell our story,

a story shaping

our ancestral genes,

a story held in

the molecules  of water

of river,  lake,  stream

of Lough Derravaragh,

where Lir’s cursed children  dwelt

of Lough Gur, through whose secret portal

Oisin followed  Niamh.

of rivers Corrib, Lagan, Liffy and Lee

the umbilical cords of our cities.

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Those who would sell our life source,

to untamed corporations

have them steal our dreams                                     

reign us in like sheep

metering  out  our water

to serve their  greed.

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Those same men, whose fathers

fought for our freedom,  land

our dignity, .

want to turn our water into

commodity

and sell it back to us

at fetished market whim.

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Dawn spreads gently

over the city, Spanish Arch

St Nicholas,  the Claddagh,

and night returns subdued

to it’s underworld.

That day has come

 

s

 

Anne Irwin

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The Changing Pattern of Foreign Investment in China

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This article was originally posted on John’s blog Key Trends in Globalisation on the 21st of October

Inbound investment into China continues to be the highest for any developing economy – US$101 billion in 2013 on UN data. But the pattern of investment in China is changing significantly as the country develops, and this trend will inevitably become more pronounced. China refusing to acknowledge and internalise that only 30% of the world’s population now lives in countries with a higher per capita GDP than China leads to confusion on the key issues in foreign investment.

In the first decades after the start of China’s economic reforms in 1978, inward foreign direct investment (FDI) was primarily undertaken by overseas companies to create a base for exports. Although this was helpful in China’s early stage of “reform and opening up,” the investment was frequently very low value added. For example, a 2009 study found China received only 2 percent of worldwide wages paid for iPod production despite the fact that every iPod, at that time the world’s most successful consumer product, was manufactured in China.

As recently as 2010, the majority of China’s exports came from foreign-owned companies. Among large exporters, the role of foreign investment was even greater – of the top 200 exporting companies in 2009, 153 were foreign-funded. Only among small and medium size exporters were Chinese companies dominant and Alibaba’s original success was creating the Internet systems that connect these Chinese companies to their foreign markets.

But as China’s economy has developed, the reason for its attractiveness to foreign companies has radically changed. In comparative international terms, China is no longer a low-wage economy. On World Bank data, only 30 percent of the world’s population now lives in countries with a higher per capita GDP than China, and wages will be approximately proportional to this. In Southeast Asia and South Asia, every developing country except Malaysia now has a lower per capita GDP than China.

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Welcome to the New Tax Avoidance Scheme, Same as the Old Tax Avoidance Scheme

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Well, not quite – but the effect may be the same.  Many international commentators welcomed the Irish Government for ending the infamous ‘double-Irish’ tax scheme.  But just as it shut this down, it announced a new scheme: a ‘knowledgedevelopment box’ designed to reduce corporate taxation to a little over six percent.

The ‘knowledge-development box’ is based on the concept of the patent box used by the UK and the Netherlands to attract multi-nationals with preferential tax rates on income flowing from patenting activity.  However, the scope for the Irish box could be wider.

After all, what exactly does ‘knowledge-development’ encompass?  In the UK and the Netherlands, companies get a tax break on income generated from inventions.  In Ireland, we may see all manner of activities thrown in – source code, copyrights, patents, branding, trademarks and that expandable concept – R&D.  And we’ll have to wait and see to what extent it facilitates more than just actual activity in Ireland (will it encompass activity ‘managed from Ireland’).

The Government was keen not only to put in a replacement for the double-Irish scheme, but to reassure key multi-nationals.  Government officials briefed ‘multinational investors’ on the rationale for the Government’s policy (question:  were any of you included in a conference call by officials prior to the establishment of the water charge?).  The message was clear: the Government may have been forced to abandon the double-Irish due to considerable international pressure – but don’t panic; a replacement is at hand.

It is argued that we need multi-national capital to create high-end employment in the global supply chain.  No one disputes this.  Ireland’s indigenous economy, even with the best policies in place, would not have created the pharmaceutical sector we have today.  However, this common-sense observation is then used to argue that the only way to achieve this is to pursue our current accommodative corporate tax regime (that’s a nice way to describe a tax haven-conduit).  Yes, we have another roll-out of TINA – there is no alternative.

But are there alternative approaches to attracting multi-national enterprises without resorting to tax tricks or ultra-low tax rates?  Does Ireland benefit more than our peer-group EU countries from multinational employment?  This argument – that we have been more successful than other countries in attracting multi-national jobs – has been restated so many times that it is taken as gospel.  But is it true?

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Revealed: EU science chief promised to be “flexible” towards Israel’s war crimes

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This article was originally published in Electronic Intifada on Tuesday the 15th of October.

Israel’s war crimes sometimes have to be overlooked, according to a senior European Union representative.

During 2013, Israel reacted angrily when Brussels officials issued a policy paper stating that the EU would not award funding to firms and institutions based in Jewish-only settlements in the occupied West Bank. Rather than standing up to Benjamin Netanyahu and his government, the EU’s top figures tried to downplay the significance of the “guidelines” contained in that paper.

One letter — not published before now — shows that some of this downplaying was tantamount to grovelling.

Signed by Máire Geoghegan-Quinn, the EU’s commissioner for scientific research, in November last year, that letter states that both the Union and Israel “are conscious of the need to find flexible ways of implementing the guidelines.” Such flexibility was required, she argued, to “ensure full respect of the Union’s policy in relation to the territories occupied by Israel, while not deterring Israel’s association to EU programs.”

Don’t be fooled

Her attempt to sound balanced and nuanced should not fool anybody.

The only possible interpretation of her letter (published below) is that although the EU considers Israel’s colonization of the West Bank to be illegal, it is willing to compromise on that position for reasons of political expediency.

The construction of Israeli settlements violate the Fourth Geneva Convention. They involve the tightening of Israeli control on land it acquired by force.

In other words, they are war crimes.

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Austerity is Over? Now Back to the Real World

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Headlines and sound-bites abound: ‘austerity is over’, ‘the beginning of the end of austerity’, ‘we beat austerity’ and so on and whatever and sure, why not.

Let’s cut to the chase: austerity is not over. It is entering a new phase. We will now experience austerity ‘below the waterline’. Austerity by stealth, austerity beneath the radar: give it any description but have no doubts. We will continue to suffer austerity, probably up to the end of the decade.

You don’t have to believe me – just look at the Government’s own projections. They clearly show what is in store. And it is not pretty.

The following comes from the Budget 2015 Full Report (Table A.2.2, page 99). In this table the Government projects their spending plans out to 2018. You’ll see that spending pretty much flat-lines, with some slight downward pressure, up to 2018. However, this is what’s called the ‘nominal’ spend – the actual Euros and cents. To get a real world sense you have to factor in inflation.

The Government provides the inflation or deflator figures in Table 5. They estimate that inflation (for the economy, the inflation figure is the GDP deflator) will be over six percent up to 2018. Therefore, public spending – if it is to maintain its value – must rise by that amount. If it falls below that figure, we have a real cut; if it rises above that figure, we have a real increase. So what do we find?

realincrease1

Primary expenditure excludes interest payments; therefore, it is the total spending on public services, social transfers and investment, with other small categories such as subsidies. We find that total real spending will fall by over six percent by 2018.

In regards to public services (estimated on the basis of figures produced in Table A.2.1 on page 97), we find that real spending will fall by five percent. That’s five percent less than we have today to fund schools, hospitals, policing, transportation, enterprise supports – all our public services. That is going to put a real squeeze on the breadth and quality of our services.

As to investment – the key to long-term growth – the Government intends to cut its spending by nearly 13 percent. This will undermine our infrastructural and business capacity. We will fall further behind our trading partners (and competitors) who are investing far more than us. Of all cuts this is the most irrational from an economic growth point of view.

But there’s another twist to this. For populations do not remain static. Our population is estimated by the IMF to grow by over three percent up to 2018 – which means more people to provide services and income supports to. So if we take the real spending cuts above and break them down on a per capita basis what do we get?

realincrease2

It is worse. Now overall real primary spending falls by nearly 10 percent, with public services falling by over eight percent and investment taking an even bigger hit.

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A New Kind of Trade Unionism Emerging

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This article was originally posted on the Trade Union Left Forum on the 14th of October.

A new kind of trade unionism is emerging and consolidating itself within the right2water campaign, led by Mandate and Unite and supported by OPATSI, the CPSU, and the CWU. These unions are bringing the broader social and economic interests of their members to the fore and committing resources, time and effort to support mobilisation not only of members, but also the working class and communities more generally.

By viewing their members as workers (as opposed to people paying a subscription for work-place representation services) these unions are placing the workers’ immediate social demands alongside, and equal to, their immediate work-place concerns. This is crucial if the trade union movement is to really represent its members and to recover its power and leverage in society. Wage increases alone will not improve the lot of workers while the political economy of the country is being restructured from one made up of citizens to one of customers in a toll-booth economic and political structure.

The TULF on many occasions has suggested that the trade union movement has a unique position in Ireland in having the resources and channels of communication to support the mobilisation of working people in a way that no left party can. And now it seems that some unions are realising this potential, which is both necessary and welcome.

The right2water alliance is a genuine alliance of union, political and community groups, making a clear demand and statement, “calling for the Government to recognise and legislate for access to water as a human right. We are demanding the Government abolish the planned introduction of water charges.”

As well as the five unions mentioned, community groups and parties have signed up to the campaign. Some 40,000 people have signed a petition calling for the scrapping of the water charges, close to 100,000 marched at the demonstration on 11 October, and more local actions are planned for 1 November.

The right2water campaign is not dictating tactics to communities or individuals but is building and growing a broad campaign of groups and people based on the principle of water as a human right and as a publicly owned utility and resource. Some on the left have attacked the campaign for not demanding non-payment; but at this moment building the biggest, broadest alliance against water charges and privatisation is the priority. A turn towards direct non-payment may be necessary in the future, but right now the campaign’s strength is in growing and building the alliance rather than splintering over tactical matters.

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Open Letter on the Housing Crisis

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An Open Letter to the Dublin City Council, Real Estate Agencies in Dublin, the USI, the PRTB, the HEA, Department of Education and skills, the NAMA, Landlords, the Citizens and Students of Dublin City on the Housing Crisis in Dublin.

As well as being sent to all of the above today it was also published on www.increature.com issue 4 on Sunday the 12th October

Dear all,

We are two final year university students who live in Dublin and wish to express our profound discontent with some of the situations we found ourselves in during the housing crisis that took place this summer in the Irish Capital and the clear discrimination against students which is common practice in the rental market.

Between June and September, we were actively looking for private accommodation in Dublin. We sent several hundreds of emails, made hundreds of phone calls, many of which were from abroad, went to numerous viewings and spent a lot of time, money and energy looking for a place. This house hunt was long, stressful and, overall, a very unpleasant experience which resulted in us sacrificing a large part of our summer, spare time after work, family time and the possibility to advance with college work (readings, dissertation, etc).

We finally found a place two weeks before the start of the academic year. A place that we are not entirely satisfied with, but had to take because we had no other decent offers. We are somewhat relieved that we were lucky enough to have found something, as we are very aware of the fact that many students were not as lucky and are therefore forced to commute, live in hostels or even have to take a year out of college.

One of us is a final year Student in the faculty of arts and humanities who worked the whole summer in a well-respected office in Dublin and will continue to work part-time throughout the academic year. The other is a final year Political Science and Geography student who works during the summer months and is financially supported by her father who works in one of the European Institutions in Brussels. Both of us have letters of references from all our previous landlords stating we are responsible tenants, that the rent and all utility bills have always been paid on time and that we left our previous flats in good condition. Furthermore, we both have good work references from well-respect institutions.

Having such documents, one must wonder how it took us three months to find a mediocre residence.

To us, the answer is very simple. The housing crisis meant that it was hard for everyone to find a place in Dublin due to the fact that this year there was a 43% drop in supply in the rental market and a 7.5% increase in rental prices, but in particular students have a clear disadvantage and are discriminated against.

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Arise Kilnamanagh and take your place among the nations of the earth

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Book Review: Hidden City: Adventures and Explorations in Dublin, Karl Whitney (Penguin Ireland 2014)

Dublin, perhaps uniquely, has suffered mythologization by genius and by sentimentality. Caught between Leopold Bloom and the Leprachaun Museum (yes, there is), the city of Dublin, the living breathing people and the physical structures they live in and on, has fallen out of sight. Joyce and Flann O’Brien caught its speech, but the one did it so perfectly people are afraid to read him, and the other was so accurate they think the humour is a laughing matter; James Plunkett wrote Dublin on a human scale and gave it flesh and blood characters, but is little known outside Ireland. We have ended up with Bloomsday and Paddy’s Day, the first now more kitsch than the second.

Karl Whitney has now written a book that gives us back Dublin as a city, not the set of a novel, or the battlefield of dreams of some misty eyed tourist in search of their heroic and downtrodden ancestors.

While some of the tourists might be inclined to follow Whitney’s Joyce trail—visit all of Joyce’s Dublin addresses in order (the Trieste equivalent includes his favorite knocking shop)—or even his Liffey descent—from where the river becomes tidal to the last bridge before the sea, crossing every bridge on the way—his bus game would be a bit too Situationist. In this one, you take buses for ninety minutes, changing bus every fifteen, crossing the road if a coin comes up tails. The first time he tries it, he ends up in an area with only one bus. A later attempt is no better. Taking a bus in Dublin has no element of play, but only `the extreme frustration familiar to the demoralized commuter.’ Whitney would not be the first artist crushed by the inadequacy of Dublin’s infrastructure.

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The ‘Taxes’ on Living Standards the Government Won’t Be Addressing

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With all this talk about taxation and Budget 2015 (and one of the few doing any plain talking is Fr. Peter McVerry – calling tax cuts for high-income earners ‘outrageous’) there are ‘taxes’ that people pay that the Government will do little, if anything, to address. Indeed, the budget will be framed in a way that undermines the Government’s ability to provide relief against these ‘taxes’.  What am I talking about?

We automatically assume that ‘taxes’ are something the Government levies.  Therefore, when we discuss ‘tax relief’ or ‘tax cuts’, we refer to reductions in things like income tax, USC, PRSI or VAT, though the latter doesn’t feature much.

However, there are ‘taxes’ that people pay when the Government fails to provide the services and income supports it should – if one accepts that we are a modern European state.  We can call these ‘taxes on living standards’.

Take, for instance, childcare:  in Ireland, a household can pay up to €800 a month and more for a childcare place.  In most other continental countries, childcare can cost as little as €150 per month and even less for the low-paid.  Why the difference?  In other European countries, childcare is financed through the public sector, usually local authorities.  In Ireland, people are forced on to the private market.  This is quite ‘taxing’ for these households.

If the Government rolled out affordable childcare, households with children could expect reductions of up to €500 to €600 a month – or thousands of Euros a year.  This reduction in childcare fees (‘taxes’ for those in need of this vital service) would be greater than any income tax cut.

Or take another example – public transport.  In other countries, public transport receives a high level of public subvention, or subsidy.  This ensures expanded services and affordable fares.  In Ireland, public transport receives an extremely small subvention.

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The October issue of Socialist Voice is out now

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The October issue of Socialist Voice is out now. You can view it online here.

Articles include:
Socialism: a historical necessity Nicola Lawlor:

The deepening environmental crisis—described in various articles in Socialist Voice over the years—makes the requirement of a transition to socialism not just desirable but absolutely necessary for the survival of humanity.

Water is a human rightKathleen Lynch 

Next to oxygen, water is the most essential element required for human existence. Two-thirds of the human body consists of water. While we need many nutrients to sustain us in life, we will die within days without water. Water is more than H?O: it is integral to human life itself.

Water charge revolutionaries: Eoin Mc Donnell

It seems there’s a revolution going on. The people of certain working-class estates in Dublin and others scattered around the country have had enough, and it’s all-out war against the state—or so it seems. This is what we are to believe from social media: scenes of angry, indignant and ready-to-fight workers who have taken to the streets to do battle with the well-equipped wing of the state and its masters, Irish Water.

Sister Teresa wants out of the euro zone: Tomás Mac Siomion

Spain now has the most politically active and liberal citizenry in Europe. Public outcry, expressed through huge marches in the main cities, has just forced the government to withdraw its proposed abortion legislation (in effect a regression to the Irish model), which was to replace the existing full freedom-of-choice regime

Job Bridge for teachers: Not just a union StruggleEdmund O’Neill

When news of Job Bridge being used for hiring teaching staff hit the air waves in September, Joe Duffy’s hotline was sizzling. The spread of “internship” culture had reached the gates of the public sector, and a lot of people, especially newly qualified teachers, were up in arms. During the rest of the week shows like “Prime Time” pushed out debates on the issue.

Portrait of a patriot” Alan Hanlon

A biography of T. K. Whitaker by Anne Chambers, entitled Dr T. K. Whitaker: A Portrait of a Patriot, has just been launched. Whitaker was born in 1916, and in the 1950s and 60s (May 1956 to February 1969) he was secretary of the Department of Finance.

Tin Town Edmund O’Neill

They want to move us all down to tin town
They want to bring us all down to tin town

Is Leatsa an Tír Seo Gabriel Rosenstock

In ómós Woody Guthrie, a cailleadh ar 3 Deireadh Fómhair 1967.

Is leatsa an tír seo, is liomsa an tír seo

An evening of dialogue on class politics Tommy McKearney

Reluctant to risk getting lost in loyalist East Belfast, the two Dublin trade unionists took a taxi across the city centre to where their union was participating in a public discussion. They were anxious not to be late for an event that marked a new departure for their Cork-based union.

Ireland is a criminal accessory to war: It’s time to shout Stop!

The eighty-year-old Galway peace stalwart Margaretta D’Arcy, who was imprisoned twice this year for opposing US military flights travelling to war via Shannon airport, is continuing her peace campaigning. She is calling on people to join the peace demonstration at Shannon on Sunday 12 October to mark the thirteenth anniversary of the US military presence there.

The making of a monsterRobert Navan

If the Western media were your only source of news you could be excused for thinking that the terrorists of the “Islamic State of Iraq and Syria” (ISIS) and the United States have always been sworn enemies. The part the United States played in arming and equipping this force is rarely, if ever, mentioned.

 

Fascism in the twenty-first century: Seán Edwards

Samir Amin, “The return of fascism in contemporary capitalism,” Monthly Review, vol. 66, issue 4 (September 2014). Patrick Cockburn, The Jihadis Return: ISIS and the New Sunni Uprising (New York: OR Books, 2014).

Samir Amin begins his essay with a brief discussion of the different manifestations of fascism in the 1930s, distinguishing between fascism in Germany (a developed capitalist power seeking domination), fascism in second-rank powers (Italy, Spain and Portugal), and fascism in defeated (France, Belgium) or dependent states (Hungary, Romania, Croatia).

 

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Right2Water March: Sat 11th of Oct, Garden of Remembrance @2pm

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The Right2Water campaign established by a number of trade unions and supported by campaign groups and left political parties will be holding a demonstration against the introduction of water charges at the Garden of Remembrance in Dublin at 2PM on Saturday, 11th October.

Everyone is being encouraged to wear or bring something blue. It is hope to form a huge blue water drop filling the streets with blue from O’Connell Bridge up D’Olier St around into Westmoreland St back to O’Connell Bridge.

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What is Going On in the Irish Economy?

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After a deep recession, after years of stagnation, the Irish economy is growing in leaps in bounds.  The ESRI is projecting by 10 percent growth over this year and next.  These are almost boom-time growth rates.  Should we be a bit wary?

It’s hard to disagree with the ESRI’s Dr. John Fitzgerald when he wrote:

‘ . . . the standard EU harmonised national accounts are not a satisfactory framework for understanding what is happening in the Irish economy.’

This is primarily due to the impact of multi-nationals and the IFSC which can give a false reading of headline.  Let’s go through some of these categories and then come back to the question:  how satisfactory or reliable are the national accounts and growth projections based on those accounts.  This is a bit long and may be a tad technical in parts but hopefully you can stay with it:  it tells a story about how a story is being told – and it is the telling we should be wary of.

Multi-nationals and the GDP

Everyone knows that GDP is not the best measurement of the Irish economy.  But it’s not just because multi-nationals make profits here and then repatriate them (that is, take out of the country).  The reality is that the profits are not made here but are counted here.  Let’s look at two key sectors where multinationals dominate:  manufacturing and information & communication (the latter is where the Apples and Googles would be located). Note:  this is data supplied by the Irish Government to the EU.

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Profits in Irish manufacturing nearly 8 times that of other EU-15 countries; in the Information & communication sector, it is over 3 times.  Clearly, these are not profits generated by employees in Ireland; they are generated in other economies and ‘imported’ here to take advantage of our low tax rate and our position in the global tax-avoidance chain.

The point here is that our GDP is distorted by multi-national profit-shifting – and that’s before you start taking account profit-repatriation.

Well, Then, We Can Use GNP

Well, no, that isn’t a satisfactory measurement either.  GNP is just the GDP after you take account of money flowing in and out of the country (and more money leaves Ireland than comes in).  Therefore, GNP is still distorted by the multi-nationals’ profit shifting that we saw above.

We can’t be certain if the ‘fake profits’ that appear in our GDP are automatically taken out by multi-nationals.  They may be retained or swim around the IFSC pool (don’t forget that US companies avoid US tax by keeping their money abroad). And not all money flowing out of the country are repatriated profits – they can be interest payments, indigenous multi-nationals investing abroad and households sending money out of the country.

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Five Points for a Citizen Economics

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Budget time is really the only window where citizens are encouraged to engage in economic debate, and even then the space of time is too short and the range of topics up for debate too narrow to make much impact. When it ends, and for the other eleven months of the year, economics is the preserve of technocrats.

That is a serious problem. Economics is the discussion of how things in our society are produced and distributed. If you leave it to experts there is a big cost for democracy. Yet, while people feel comfortable engaging in debate about politics in the Middle East or presidential elections in the United States, there is a reticence to talk about economics.

Part of this is down to economics as a discipline, which has become increasingly remote from day-to-day life. The primacy of the market as a means to resolve problems has led to the rise of ‘market scientists’, who are seen as the authoritative voices on running an efficient economy. The language deployed by these experts is deliberately exclusive. Certainly they are unlikely to start explorations of economics with parables about pin factories, as Adam Smith did in The Wealth of Nations.

Yet they dominate economics discourse. When economics is discussed with any substance in the mainstream press market scientists from universities, think-tanks and finance houses are given free reign to make objective statements about the common good. Research by Julien Mercille has shown that between 2008 and 2012 77% of commentators on austerity were from elite institutions.

Another factor leading to the retreat of ordinary people from economic debate is the narrowing space for democracy in the economy. The democratic sphere only extends to areas where there is or could be public ownership. Outside of this decisions are made by private individuals or organisations. As wealth becomes concentrated in fewer hands, fewer economic decisions are made with public participation.

This has bred a cynicism about what can be achieved by discussing economics. With capital increasingly breaking free from taxation – and mobile enough to defeat strikes – people have come to accept that social problems can only be resolved by appealing to private individuals and organisations to solve problems profitably through the market. And so we are relegated in the economy from citizens to consumers.

This must be reversed if we are to build a politics in Ireland that can reclaim our society from the political establishment and the interests they serve. Joan Robinson, one of the great economists of the twentieth century, was once asked why people should study economics. She replied, “so that economists can’t fool you”. Implicit in this comment is the need for citizen economics.

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