Usually, the fantasies indulged on July 12th in Ireland are played out up the road in the North. These are fantasies about past glories and are celebrated by the kind of people who the 20th century (let alone the 21st century) left behind. Rather than being a sign of confidence and strength, the Twelfth simply reinforces the political and economic cul-de-sac up which the unionists have waltzed. However, this year, fantasies were not limited to our separated brethren.
Yesterday, official Ireland delivered its own fantasies and these are as misguided as anything seen on the streets of the North. These fantasies are the Irish GDP figures.
In fact, the Irish GDP figures are now so off-the wall, they remind me of a time before the Berlin Wall came down. Back then, I was in a hotel in communist Czechoslovakia and the only programme on TV was one exalting the extraordinary harvest of the Czechoslovak agricultural industry. Without a hint of irony, the announcer rhapsodised about the bumper harvest, yet people queued for bread outside on the street.
Don’t you get a similar feeling when our politicians, such as Finance Minister Michael Noonan, “welcomed” figures which stated that Ireland’s income rose by 26pc last year when people can’t find a home?
According to our Central Statistics Office, the Irish economy grew by 26pc past year. This is clearly nonsense. Our politicians should have guffawed, embarrassed that Ireland’s official figures are so meaningless. But they didn’t.
Let’s examine the implications. Although the figures are wrong, they still tell us something about how this economy works and is likely to work in the years ahead. There could be an opportunity here.
According to the figures, our exports are up 34pc; investment is up 27pc and imports in 2015 rose by 22pc. As a result, the economy grew by 26pc. In terms of what these would mean if it were true, it would imply that the average income per person working in our country would have increased to €130,000 per annum in 2015.
But do you feel richer? Do you feel that much richer?
Of course you don’t.
Although Irish national income figures have always been rendered less than meaningful by multinationals moving money in and out of the country, last year something else happened. A massive industry has moved its assets here for tax reasons. That industry is the airline leasing industry. If you move all the planes on the balance sheets of big airline leasing companies onto the Irish balance sheet, obviously investment goes through the roof. This is driving the GDP figures.
However, while this year’s distortion is huge and is attributable to one industry, over the years other multinational sectors such as tech and pharmaceuticals have had a similarly magical affect on national income figures.
The problem with the multinationals is that the amount of their activity that goes to Irish people and into our pockets is very modest. As these companies have become more and more capital intensive, less and less money has gone towards the wages of Irish workers. So over the years, even though the amount of income created by the multinationals in Ireland has risen dramatically, the amount trickling down to Irish workers has actually been getting smaller and smaller.
Apart from wages, money comes to Ireland through corporation tax and as their income has increased and profits registered in Ireland have increased, the tax take has gone up. However, it is only a fraction of what goes back to the international shareholders of the companies in the form of dividends and higher share prices.
Therefore, the vast majority of the upside accruing to the presence of multinationals here does not go to the Irish workers or the Irish exchequer, but to foreign shareholders.
The latest figures about the 26pc rise in GDP, only reinforce how crazy the situation has become.
However, rather than complaining about the situation, why not see whether there an opportunity here? This is the way the world is and Ireland’s capital base has been built up by deploying our tax policy for the benefit of multinationals and their shareholders. So shareholders are winning big time. Therefore, why not become shareholders too? Why not take shares in the very companies that are making out in Ireland and distorting our GDP figures?
At the moment the world is moving toward closing tax loopholes, which will culminate in firms having to pay the headline rate of tax here.
But rather than taking this money in tax, to be frittered away in the next political auction, we could take shares. By taking shares in multinationals, we could create an Irish sovereign wealth fund that is linked to the share performances of some of the best-governed companies in the world, plugged into the world economy like no other and providing huge wealth for future generations.
So how would something like this work? Take this example.
In 2012, US multinationals made $100bn profit here on which they are supposed to pay 12.5pc tax, or $12.5bn. But in fact they only paid $4bn. So they ought to pay $8.5bn more than they do.
Why not encourage the multinationals to pay the difference between what they actually pay ($4bn) and what they ‘ought’ to pay ($12.5bn) in shares? We could pledge these shares for future generations of Irish people.
The figures are significant — $8.5bn is a lot of money, and it grows. Shares are permanent wealth, whereas taxes are more transitory income.
In recent years, financial wealth has grown much more quickly than income. Imagine an Irish sovereign wealth fund comprising the shares of these companies, compounding at these rates?
Why would the multinationals go for it? Because giving shares or share options is much cheaper for the company than giving cash. It always is.
And they are used to operating in this way. What multinational treasurer would not look at this option?
By matching our interests with the stakeholders and shareholders we would be jumping together and both have skin in the game.
Let’s see this ludicrous GDP figure as an opportunity. Rather than moan, let’s go and do something positive about it.
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He just can’t resist a sneer at the prods, can he?
Can anyone tell me if there’s any difference between all that 12th nonsense and the recent 1916 bs? Marty morrissey in ira uniform. Holy moley
Excellent article. And a worthy proposal. Bear in mind that certain entities print off shares in what can only be equated with the wheelbarrow of money notes scenario, for their own directors share options. In fact it is bonkers. Never mind the dodgy “non-GAAP” accounting returns, and the share issues – what is the cash flow ?
It seems that people are talking about the absurd GDP figures, like former residents under Communism talked about those bumber harvests. So the analogy will resonate.
Constantin Gurdgiev, pointed out the irrelevance of GDP and GNP to most people’s everyday existence.
Ireland’s GDP figures (and the derived GNP stats) are virtual. They can be souped up, recycled, massages, and downsized. For entirely selfish reasons.
Ireland’s debts (both public and private) are real.
And the public sector debt in Ireland is completely out of control. Even with 50% marginal tax rates on labour, and the highest VAT rate in the world, it is still not enough.
We are actually in trouble, and there is still no honest discussion about the matter.
We had a sovereign wealth fund called the Irish fishing waters off our coast. And the politicians squandered it for some recognition in Brussels, and grant aid cash to buy votes. Well done, the Bertie party. They are waiting in the wings to get into power again, so that they can wreck it all again. CJH turned FF into scoundrels of the lowest order. The GDP figures are a bit like the evidence of an FF TD before a tribunal – we see large numbers involving money everywhere, but nobody seems to know where that money ends up, when everything… Read more »
Ou politicians are really just a collection of PR specialists pretending to be resposible for the running of a country. They are averse to responsibility, but eager for power. They weaken Ireland, whilst obeying Brussels. They make promises to the people, and the deliver for the wealthy and well connected.
The whole thing is as virtual and pretenscious as those official GDP figures.
Hey David, someone has nicked your Punk Economics idea.
http://thenickwright.com/
Peter – unemployed, no benefits, healthy, have experienced mental heath episodes but, not delusional or idle, living off the wife in Derry!
Whilst Theresa May is ignoring her hubbie’s dodgy c.v & channeling Elizabeth Warren’s “you didn’t build all this” rap- on the other side of the Irish Sea, the Tax Justice debate is, to all intents & purposes, still verboten in polite society. Thus, Tax Justice isn’t to be demanded, but ‘encouraged’. Doesn’t work like that, lads. #IronFistVelvetGlove etc. “At the moment the world is moving toward closing tax loopholes, which will culminate in firms having to pay the headline rate of tax here…. Why not encourage the multinationals to pay the difference between what they actually pay ($4bn) and what… Read more »
Comic interlude:
‘Meanwhile, EU Commissioner Phil Hogan also weighed into the debate, telling his local KCLR radio station that Mr Kenny “saved the country”.
“He’s now going to have face the challenges of Brexit for Ireland. He’s very well received in Europe by other states.”
Kenny leaves Merkel talks empty-handed after ‘special case’ snub
http://www.independent.ie/business/brexit/kenny-leaves-merkel-talks-emptyhanded-after-special-case-snub-34879264.html
One of the few ‘economists’ who isn’t endlessly idiotic stares into the tea-leaves & sees the future pattern of EU democracy in a panoramic post-Brexit panic overview of Project Fear: ‘Europe is not to be held together by its benefits, which far exceed the costs. Economic prosperity, the sense of solidarity, and the pride of being a European are not enough, according to Juncker. No, Europe is to be held together by threats, intimidation, and fear. That position ignores a lesson seen in both the Brexit vote and America’s Republican party primary: large portions of the population have not been doing well.… Read more »
Hmmm, me thinks there is some merit in this idea. Of course there are loads of ptovisos but yes it probably has some merit. Firstly, let’s get real,Ireland Inc operates in a competitive tax ‘ pricing ‘ environment, competing for mobile foreign capital with many other comparable countries e.g. the UK,Netherlands, Switzerland, etc, etc, etc, etc so you have only so much scope to ask for shares. Secondly, shares still cost multinationals and their shareholders through value dilution, granted this may not seem as expensive upfront as tax charges but it’s still a real cost on companies. Some companies would… Read more »
Right, so. 5 minutes to lunch-break, hike, bath, siesta, etc. So I’ll just throw out an ‘opinion’. I think this is the gravest crisis that the Republic of Ireland has faced in it’s history and yet almost the entire D4/IFSC chatterati on Twitter are as delusional as they were as the GFC broke in 2006/7/8. The cult of Economic Man has finally collapsed but the high priests simply cannot accept that it’s Game Over, that Brexit is a cognitive re-boot. For what it’s worth, my sources tell me there is zero intention of Core UK serving Article 50 unless and… Read more »
Speaking of ludicrous CSO figures apparently the population has grown by nearly 4% since 2011. What about the supposed immigration of younger Irish people? Where does that fit in? Or will we agree to pretend it didn´t occur? You know like WW2? ( And before anybody corrects me by telling me it is a net figure I would like to say the following: Yes, I know. It is the collection of the data, or if you like the fact that the forms are voluntarily filled out, or not as the case may be, with no true sanction for inaccuracy or… Read more »
Actually, I was thinking these GDP figures were almost worthy of North Korea. Even the the Chinese don´t fiddle with their figures to go so far beyond the limit of average global credibility. It is a complete farce and Paul Krugman is perfectly right to lampoon us the way he did. We seem to do this needless shooting-ourselves-in-foot-on-a-global-scale PR thing fairly often for a small country. Some of the obvious ones I can think of would be the demand to be admitted to the 2010 World Cup in 2009/10 as an extra team by our local mini version of Sepp… Read more »
Final point in this particular piece of institutional stupidity: Bloomberg suggested that because of the inflated GDP figure we might have to contribute more to the EU budget since we are so much richer now. http://www.bloomberg.com/news/articles/2016-07-13/-leprechaun-economics-earn-ireland-ridicule-443-million-bill Plus there is likely to be a UK sized hole in the EU budget pretty soon (details to be negotiated). Oh and possible ramifications for trade, too. So does anybody see a potentially small financial problem emerging as we gain large (“on paper´´) but (“in reality´´) false growth in the multi-national sector who pay f@*k-all tax to us but we could well up end… Read more »
“Back then, I was in a hotel in communist Czechoslovakia and the only programme on TV was one exalting the extraordinary harvest of the Czechoslovak agricultural industry. Without a hint of irony, the announcer rhapsodised about the bumper harvest, yet people queued for bread outside on the street.” As far as the fall of the Berlin Wall is concerned, it is incredible that David was in Czechoslovakia when it collapsed! I remember those times – we found it very exotic to travel to Czechoslovakia (after Poland had got rid of Communist symbols, allowed legal currency exchange, opened the first stock… Read more »
I am referring to an article by Mr Derek Scally in which he claims that Poland’s state run broadcaster TVP has censored President Obama remarks: http://www.irishtimes.com/news/world/europe/polish-broadcaster-tvp-under-fire-for-censoring-obama-1.2718309 (the alleged difference being that President Obama said “Poland stands and needs to continue to stand as an example for democratic practices around the world” and TVP’s translation was “Poland is and will be an example of democracy for the whole world”). Initially I thought that that was just a bad translation of the Polish broadcaster (which would not surprise me because they murder the King’s English) – something akin to Tánaiste Mary Coughlan… Read more »
Simple solution for all those obsessing over a united Ireland – Nixit referendum.
Only question would be where would they exit too. Who’d want them?
Prof. Ray Kinsella writes http://www.independent.ie/opinion/comment/the-militarisation-of-europe-is-a-far-greater-threat-than-brexit-34872306.html that Russia “under President Putin does not remotely equate to a threat to its neighbours”. He calls for demilitarisation of Europe. A question that comes to the fore is this: if Russia does not pose any threat to its neighbours, then why Russia has, since 1999, been repeatedly calling snap exercises (in breach of the Vienna Document that Russia has signed) including more than 100,000 troops, in which it simulated nuclear attacks not only on its neighbours like Poland (Zapad-09), but even on neutral Sweden? On February 18, 2015, Russian Tu-95 bombers flew just 40km… Read more »
Hi all, @ Deco. You are on fire a joy to read. David, Good idea but Irish politicians would have to administer it and there lies the rub. Something which hasn’t been mentioned is what is the real figure? I bet we are contracting! Records breaking emmigration etc with immigration allowing zero hour min wage contract mcjobs instead reducing the velocity of money and a gubuernment assets stripping the population with wealth taxes, a banking system more insolvent than ever, and I think the sixt biggest national debt in the world? Bank lending still contracting. What’s the real figure Dathi?… Read more »
All government statistics are manipulated and a lie. The inflation rate is a lie. The benefits of inflation are a lie. The central banking system perpetuates the lie of the benefit of debt. Our money system is a fraud. It requires ever increasing amounts of currency be issued just to retain any economic activity. It is the greatest bubble ever created. The suggestion that the debt will ever be repaid is a lie. The amount of national debt loaded on the taxpayer is a bubble, unsustainable. The bonds are in a massive bubble. The stock markets are in a bubble… Read more »
More commentary on the real world of lies and deceit.
http://usawatchdog.com/
You are really famous now D McW, you have been mentioned in a WWN poll!
http://waterfordwhispersnews.com/2016/07/13/poll-should-leprechauns-be-allowed-report-on-economic-affairs/
This is very worrying… One of Ireland’s most influential economists champions the idea that ‘Ireland’ take shares in multi-national corporations, based in Ireland, at least nominally, and this is sold as being a good thing for Ireland…?!? And peoples main reaction has been to consider the unionist/republican divide?! What’s going on here? This article seems, to me at least, to be laying out the blueprints for serfdom. It’s terrifying! Firstly it is not an either/or choice with respect to how we respond to corporate criminal and immoral practices. It is not only a choice between complaining and/or complying with corporate… Read more »
“By taking shares in multinationals, we could create an Irish sovereign wealth fund that is linked to the share performances of some of the best-governed companies in the world, plugged into the world economy like no other and providing huge wealth for future generations.”
Sovereign wealth funds have a history of being looted well before their time.Norway is doing better.
Here is a tale of two funds.
http://www.theglobeandmail.com/report-on-business/international-business/european-business/norways-sovereign-wealth-fund/article25973060/
London BBC elite on safari to Brum/Stoke/Hull to find out about the Brexit Reservations of the Lumpen Proles, peddling their divisive race-baiting Cultural Marxism. There was, indeed, a spike in hate crime but it quickly died down, despite the best efforts of the Establishment Media and their Project Fear morph into Project Smear via Special Snowflake Remainiac idiots like #thisiswhatyouhave done, mirror’d by compliant Norman D4 media to warn off those on the island of Ireland thinking of an Uprising4IRExit.
The UK has ample hate crime legislation but the discredited losers want nothing more than a Folk Panic.
https://www.youtube.com/watch?v=0awwM6ZXSGc
Please move to the front of the bus. Brexit begats bonus.
http://www.zerohedge.com/news/2016-07-14/uk-now-front-queue-america-rushes-pass-trade-deal
Turkey coup d’etat – Discuss.
http://usawatchdog.com/weekly-news-wrap-up-7-15-16-greg-hunter/
More Islamic Terror in France, Black Lives Matter is False Narrative, Phony Stock Market Highs
All governments lie to their electorate. Plus market support by central banks distorts the markets. Ditto bonds.
There is no free market anymore–Chris Powell, http://www.gata.org
http://arretsurinfo.ch/guy-mettans-book-on-russophobia-an-important-contribution-to-the-demystification-of-international-relations/
Western Russophobia dissected.
‘If even one percent of London’s economic activities migrated here, we would be absolutely crippled’ http://www.thejournal.ie/london-dublin-ifsc-2879876-Jul2016/ McAuliffe relates a litany of shortcomings, from a dearth of properties for sale or rent, patchy public transport that causes daily traffic gridlock to the existence of a single runway at Dublin Airport. The annual Web Summit that used to attract tens of thousands of heavy-hitters from the global tech world announced last year it was decamping from Dublin to Portugal to ensure participants had access to hot showers and wifi, among other staples. “After three years of asking and asking we still don’t… Read more »
If everything in the world economy is in the realm of ludicrous, where every aspect of investment in financial instruments is in a bubble, why would anyone invest anything? Stocks are in a bubble, bonds in a bubble. This being so indicates ate least one is cruising for a bruising.
Record stock prices reflect a booming economy while record bond values reflect a stricken economy. Which is correct? Both , neither, one or the other. Who knows as they are highly manipulated by the central bankers. There is no such thing as a free market, only distortions.
http://www.zerohedge.com/news/2016-07-13/central-bank-wonderland-complete-and-now-open-business-%E2%80%94-epocalypse-has-fully-begun
South Africa, a failing economy.
http://www.moneyweb.co.za/news/economy/business-bloodbath-not-too-far-away/
Haha the Garda confidential line, which is supposed to be anonymous, is an answer phone which askes you to leave your details so they’ll “get back to you”. That’s really going to clean up the streets.
Meanwhile, Grzegorz is wondering when the Irish Air Force (or lack there of) is going to stop those pesky Russians from flying nuclear weapon-bearing bombers up and down the West Coast.
Like I said previously Grzegorz, give it 10,000 years and they still won’t do anything about it.