This Government will not contemplate selling property just in case it would bankrupt the banks. The State’s argument is that the market is depressed so if we were to sell the land, we would not get a fair price for it.
So we will postpone the problem: we get NAMA — a financial skip into which the banks throw their worthless mistakes — and you pay. The logic of NAMA and this Government’s central strategy is to wait for the value of land to improve before selling.
Whether you agree with it or not, this is their logic. It can be summed up by: “Don’t sell land in a depressed market.”
Yet at the same time, the Government has just announced that it will sell real assets via privatisation in a similarly depressed market. So why can it sell ESB — a real company with real assets — and not a field in Athlone which is worthless and should command the price a farmer would pay you to put a donkey grazing on it?
Why is it imperative to sell proper state assets and inconceivable to sell useless land?
This is the part I do not understand. Why does the State believe that it is okay to have a fire sale of the family silver and yet protect the very asset which caused the problem in the first place? How could it be that a depressed market is a bad time to sell land but a good time to sell a strategic electricity company?
We the people are supposed to fork out for NAMA which is paying over the odds for the banks’ and the developers’ mistakes, yet look on helplessly as the State sells — at knockdown prices — those companies that our taxes have built up. Can anyone explain this inconsistency to me?
If you look at what the Government published about the privatisation of everything it can sell, the first aim is: “To consider the potential for asset disposals in the public sector, including commercial state bodies, in view of the indebtedness of the State.”
So the key phrase is the “indebtedness of the State”. But selling big companies like ESB will not solve the indebtedness of the State.
Furthermore, the indebtedness of the State wasn’t caused by companies like ESB in the first place. The precarious position of the State with respect to its finances is a result of the estimated €50bn cost of saving the banks and a reckless overdependency on land and credit to generate enough tax to pay for the State’s current expenditure.
If you don’t solve the underlying problem, the issues will not go away no matter how much you privatise.
It is akin to the alcoholic flogging his house and his car to pay for his drinking; unless he stops drinking things won’t improve. This is why privatisation (the putative cure) side by side with NAMA and the land scam (the obvious problem) will not work. It will make us poorer and make someone hugely rich as the assets are sold cheaply.
Worse still if Eircom is anything to go by, strategic state assets are sold off and then asset stripped by anyone who can raise enough leverage to do so. I gave up counting how many times Eircom was flipped, stripped and flogged on. What is clear, is that each time Eircom was overburdened with debt to make a few quick quid for the buyers, the chances of us having a first-class telecom infrastructure faded.
Think about the challenges ahead for energy. The biggest single economic issue facing not just us, but all of the global economy, is energy. The most far-sighted countries are those which are harnessing their energy companies’ resources to come up with an environmentally friendly and efficient new energy blueprint.
And what do we do in Ireland? We flog our main energy company, which will end up in the hands of a private equity outfit that has little more than a five-year time horizon.
But there will be winners, so let’s see who might make a quick buck in a rapid Irish privatisation. Would it surprise you if it is the same professional “insider” elite being bailed out by NAMA? Well the same lads emerge as winners again.
The stockbrokers who put together (and took a fee from) many of the syndicated deals which NAMA is now buying, take a fee for every new euro of debt we issue. I have been told that entire units of our biggest brokers have morphed from selling equities and land deals into flogging debt. The more indebted the country, the more fees they make.
So the brokers made in the boom and are making in the bust and now with privatisation they will make again because they will get a fee for “placing” the shares of the newly privatised companies with investors.
What about the big law firms, the ones who put the property deals together in the boom? Well apart from being given a gig at NAMA, they will be paid with your cash to issue legal prospectuses, which will govern the terms of the privatisations.
What about the big auditor companies? What about these guys who audited the likes of Anglo and Irish Nationwide and saw nothing at all untoward? Well they will be given hefty fees in the privatisation process to produce audited accounts of our companies.
And what about the geniuses in the Irish pension fund industry, the ones who bought shares in Anglo and the Bank of Ireland when they were in the high teens? These lads will be given another opportunity to shine by being given cheap shares on a plate — for which they will take a fee for buying a company on our behalf, a company which we already own!
Selling state assets for a decent price could well be a clever thing to do, but selling cheaply is always stupid, particularly if it doesn’t solve the underlying problem.
When you look at this idea of flogging the family silver right now, you see that Ireland is doing everything backwards as this Government fumbles from one crisis to another. In economics, when a country or a company gets into huge debt difficulties, the standard approach is to kick off the recovery with a debt for equity swap. This means you tell the people who are owed money that they will have to take shares in the company or in the country instead of real cash, which the country can’t afford to pay.
In Ireland we are doing the opposite: by privatising now, we are selling real valuable equity to pay for old debt! So rather than a debt/equity swap, we are doing an equity/debt swap in a depressed market.
You couldn’t make up a worse strategy.
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Ah but David, if you don’t know by now that “public sector = bad” and “private sector = good” then you haven’t been taking your daily dose of Morning Ireland/Irish Times editorials/Pravda Nine O Clock news/Sunday Indo hysteria. Don’t worry. That hard man of economics, Colm McCarthy, has been appointed by the Govt (yet again, how many times now since 1987?) to see what bloated public sector providers can be flogged to his FF supporting buddies before being stripped, sweated and leveraged to bits. As long as the public can whipped up into a paroxysm of outrage about the union… Read more »
And this hare-brained tomfoolery, because it defies the definition of strategy, will lead to enforced redundancies when the new “investors” “rationalise” the old semi-states.
Deja Vu with the old Thatcherite policies.
All we need now is Malcolm McDowell as a Keith Joseph cameo.
It is well worth noticing that the “interim” list of “assets to be reviewed” includes 28 items, not listed in alphabetical order. So therefore we can assume it is a prioritised list. We see that the first 16 items are transport entities. The next 4 are energy agencies. Add in Coillte and the National Oil Reserves Agency – both energy related – and fully 22 out of 28 organisations, more or less at the top of the list, are in transport and energy. The conclusion can only be made, then, that this is a concerted policy to fully privatise this… Read more »
Do you think we will ever get it right or are we doomed to forever tinker around with the system until it eventually fails completely? Its hard to believe that so many highly educated people can come up with so many stupid ideas. This is Groupthink to the extreme from what I can see. When you see free speech being threatened ( Dept of Finance calling Friends First to complain ) or when you see that the opposition are the same as the actual Govt ( FGs NAMA Golf outing ) you begin to realise the issue is that so… Read more »
You asked for an explanation David, one word: NEOLIBERALISM. Almost every move that has been made since the mid-nineties can be traced to that word and the failed economic ideology behind it. It is precisely at the point when the State is at its most ‘vulnerable’ and the people most confused and in fear that you asset strip the country and privatise the kitchen sink. The aim is the complete and utter commodification of all aspects of life. We pay for everything through the nose, and worst of all for the Irish, is their seeming willingness to accept with little… Read more »
I’m no economist but seems to me it’s all part of the international drive to take state generated revenues and place them in the hands of private business. Analysts are constantly eyeing up revenue streams to see if they can get a piece of the action. People pay less tax but in turn state and municipal services are deliberately run down (e.g. health, education, infrastructure). People get to the point where anything better will do. So services are sold off to the buddies of the government at the time and we start to pay for what was previously provided for… Read more »
It gets harder everyday to be optimistic. I am very greatful to know there are sensible people left in Ireland (on here and in a few other places). I do feel though that selling our energy assets may be a last straw for the last of the mohicans! Cheers David for keeping us well informed.
While reading this article I was thinking of todays news ‘anglo going to manage arnotts ‘. So much for bad apples becoming imposters .Logic is DEAD.
[…] it imperative to sell proper state assets and inconceivable to sell useless land? full article here http://www.davidmcwilliams.ie/2010/07/28/selling-off-state-assets-on-the-cheap-is-just-madness Comment : David does have a knack of asking the right questions but I fear this, along with most of […]
Firstly, it does not matter what the people have decided, if IBEC have already decided what the policy will be. Second, we have a really hilarious environment where the public sector has companies that compete (nominally) against each other, and where private sectors compete even less against each other. Thirdly, our public sector companies have productivity and performance problems and extort ridiculous pricing on the citizen. This is evidenced in the RTE TV licence, the price of electricity, etc. Basically, for the sake of the citizen, regardless of who owns them-there needs to be an efficiency drive. Fourthly, public sector… Read more »
Maybe David and Peter Mathews, Dr Gurdgiev et al could combine blog forces to bring their lessons together in a new forum called the A45 Program. It might hit a wider audience than individual blogs?
Just another idea in the attempt to educate a much wider and less specialised audience.
Or maybe one of our web gurus could set it up with the guys as moderators. And ask Meridith Whitney to contribute occasionally on international forecasts?
I’ve clutched at so many straws over the last two years, the haycock is wobbling.
I get the feeling that whatever economic theory says about the benefits of selling off state comapnies, that the insiders and cliques that dominate life in this country, and especially that dominate life in Dublin will make sure that the rest of us are shortchanged.
Therefore I think that it is totally unworkable. With the best intentions in the world, the same cliques will screw the people, again, and again, and again….
The problem is the Irish concept of management. It is routed in gombeenism.
Maybe David Cameron would bid on the whole lot.
David does have a knack of asking the right questions but I fear this, along with most of his other questions will remain unanswered. The Finnia Fail /Green government has an attitude problem, and the shear arrogance toward the ordinary citizens of this state is just astonishing! They have been in power for so long they now believe they have a god given right to their Dail seats and the opposition suffers from the same illusions. With Labor now claiming the top prize of the Taoiseach’s Office, Enda Kenny dancing around the K-Club accepting the homage from the country’s top… Read more »
Hudson’s article “Entrepreneurs: From the Near Eastern Take-off to the Roman Collapse” ““Before Caesar’s death Rome was probably the financial center of the Roman world,” remarks Frank (1933:350). “Yet no dominating banking firm grew up.” Andreau (1999:137) attributes this striking fact to the shortcomings of the oligarchy. Most money lending was predatory. Rome’s publicani lent abroad to appropriate the wealth of others, not to finance enterprise. “The generation that came to maturity under the Julio-Claudian emperors provides one of the best examples known to history of an upstart aristocracy that abused the benefits of prosperity,” Frank (1940:29) summed up. Without… Read more »
Exellent post, couldn’t agree more. Re Eircom, we have not had mobile coverage in our village since the ivention of the mobile phone. The chances of gtting it recedes each time it is sold on and debts have to be repaid..
Great article..
Its all the stronger as its written by someone who probably has no ideological objection to companies being privatized, its focused on what is the best use of money.
The article clearly describes the cronyism, corruption, incompetence and moral bankruptcy of those in power.
Hello David.
SHOCK DOCTRINE by NAOMI KLEIN very informative read on the questions the article above poses.
DAvid, by the way I love that ‘equity/debt’ swap. Very droll.
I imagine the government at this stage, and possibly the rest of us, have come to the conclusion that the only way to cut wages and introduce some meaningful efficiencies in some of these is places is to cut them loose and be done with them and let them be someone else’s headache… Shane Ross wrote an excellent article on this very matter last weekend… http://www.shane-ross.ie/archives/778/esb-boss-fails-oleary-test/ After reading this article, flogging the ESB and other cossetted semi states becomes a no brainer… To be honest after reading this article, you can’t help but come to the conclusion that only a… Read more »
From Hudson’s “Latvia’s Cruel Neoliberal Experiment”: Western investors are waging their own social war of finance and property against labor. Initiated by the Chicago Boys in Chile in 1973, sponsored in Britain by Margaret Thatcher’s Conservatives after 1979 and by Ronald Reagan’s Republicans in the United States after 1980, this class war was capped by “Rubinomics” under Bill Clinton and the Democrats after 1992. Rejecting the classical distinction between earned income (wages and profits) and unearned income (economic rent, financial charges and land-price gains or other asset-price gains), this global war seeks to rationalize privatization of the land and key… Read more »
Tourism is one of the few sectors we can turn a buck on and stories like those from posters above abound and make you want to weep. Similar Cliffs of Moher charges upped recently amid public outcry. Many public events e.g the recent flower/garden show at Phoenix Park a killing fest for rip off merchants selling a cup of tea and a sandwich for €10 euro. Now they’re talking of tolling the National roads you thought your taxes had paid for. Putting in a low cost tourism friendly infrastructure should be a no brainer, developing assets we have with investment… Read more »
I see a worrying logic behind all of this
1) We must keep Anglo afloat because if it crashed, over 50% of the TDs would have to walk out due to bankruptcy.
2) Selling off and making all a commodity is really a case of toss out the last sandbags to avoid the inevitable crash.
3)Roads are all good and clean to allow armies/ polices to get from one part of the Island to the other to quell revolution
This is all about societal control using pay as you go for everything Tolling the national roads is the key giveaway.
At this stage, if Ireland has to sell the family silver, then the likely buyers will be sovereign wealth funds from East Asia or the Middle East. There is a lesson in this for all of us. Well, it is not to be learned by Irish people, because Dermot Ahern says that we are all saving too much. We can be sure that along with IBEC, the government is fully intent on doing something about it. (raising taxes, charges, fees, price fixing, etc…). We are seeing a courage crisis in Kildare Street. Politicians running around trying to appease union fat… Read more »
Your older contributors may remember a play which was first staged in the West End in London by Agatha Christie called the Mousetrap.Originally planned to run for something like twelve weeks it is still running nearly forty years later.Why you may ask would something like this run for so long.The plot and outcome is well known yet week after people come to see it, some even see it week after week.A bit like the Rocky Horror Show. Fast forward to Ireland in the 90s and an unassuming election that was held with the probable usual outcome of a hung result… Read more »
mycommentttttttttt We didn’t tax property! Like Latvia we taxed labour mycommentttttttttt If you have the time, its considerably worth it to read the following echoing Coldblow’s Hudson refs above. http://bit.ly/cibgeY “As we turn into..”The result is debt peonage and neofeudal privileges creating dependent “tollbooth economies.” “Latvia’s radical flat-tax experiment….” “Every Western economy has financed in public education, transportation and other infrastructure investment first and foremost by a property tax, followed by a progressive income tax that initially fell on the highest wealth brackets. In the United States the original 1913 income tax required only the wealthiest 1 percent of the… Read more »
Hi, One of the things I have noticed is that every time David puts up a new post people tend to respond with their own viewpoints on what is actually happening which is fair enough. The commentary is very well informed from a bunch of very smart people who seem to be very well read. The arguments seem to be split along political lines either centre right centre left etc. The point I would like to make here is that it dosen’t matter which political viewpoint you take whether you believe every business in the state should be nationalised or… Read more »
Hi Gege Le Beau, I think it was you who asked a question on a previous post where you asked why is it that “we” allow sociopaths to “rise to the top” of various organisations which do so much damage to the lives of ordinary citizens. The answer to that question is shockingly simple and I am afraid I don’t think there is anything we can do about it. In the first instance they don’t “rise to the top” they drag everyone and everything around them down to the level they are at. Let me explain using a bank as… Read more »
Selling National Silverware is one thing and selling Private Silverware is another .Watch how Ireland loses out to the Arabs when they finally control the best equine seeds in the world and we languish behind on second fiddle.That day has already arrived but it will be a later time when you will find out.
Hi michaelcoughlan, Not sure if the ‘sociopathic’ label is worth while. I’ve heard Joe Stiglitz talk similarly of how the system weeds out those with a social conscience and promotes those who don’t suffer the soft underbelly of responsibility and a value system that conflicts. The excellent movie ‘LA Confidential’ where the police chief lectures the aspiring detective lieuftenant with a list of questions along the lines, ‘would you be prepared to plant evidence on someone you knew to be guilty but would get off if you didn’t’. Or quoted on this list, Hilary Clinton stating national security holds precedent… Read more »
Thanks for all the comments. I think the key to all this is to get back to the simple insider/outsider analysis. Those who will benefit are a small group of “rent seekers” and they are dressing all this up as the “national interest”. I wish it wasn’t so, but it is.
Best David
David said:”Think about the challenges ahead for energy. The biggest single economic issue facing not just us, but all of the global economy, is energy.” I was standing at the Atlantic coast today watching the waves crashing against the rocks. The forces involved are colossal, even on a mild summer afternoon. I believe that it is not beyond the wit of Irish engineers to harness that energy and export the resulting technology throughout the world. This will require interdisciplinary teamwork of the highest order, harnessing the expertise of offshore construction engineers, marine, civil, mechanical, hydraulic and electrical engineers with the… Read more »
When the aim back in the late 70s was to try and get a phone into every house, the political interference was crushing. We had the technical expertise. But the deals with the vendors was political and compromise. Planning was continuously usurped by having to look after a little fiefdom of some TD in the back of beyonds. What do we have now, a 3rd world broadband. We could easily do our own energy. But the TDs will block you at every step. They’ll wreck every single plan to meet local over national needs. Privatise the lot of it I… Read more »
time for an idea again, I respect all the comment and thoroughly enjoy reading all opinions so…idea time, this may not be new but worth a go ………..tourism….I was thinking of chances to promote our country with good news, good offers, good things…..why not combine one of our biggest musical exports with one of our best assetts ? {our best assetts being our people}… U2 will recommence their world tour soon…They will play to a lot of people, I would think 100s of thousands.. a lot of tickets have been booked through the internet and I thought…Why not send out… Read more »
Ryanir may not be a great example because there will be need for transatlantic and othere international flights.. you get my gist….
The insider’s guide to owning it all Adapted for the silver screen by Tull McAdoo Plot outline (see below) Cast of characters, Bond holders/ landholders/ insiders. 1. Become majority lender in an economy of people with assets you want. 2. Encourage indebtedness by loaning generously while securing on assets of interest. (2000——2008) 3. Backstop losses with public guarantees if possible. This is gravy if one can get it. (September 2008) 4. Once debts are significant for the bulk of the population, sharply tighten lending standards. <– Economic shock – Onset of deflation (Early 2009) 5. Permit default “without risk” on… Read more »
Louise 1V France – this imbicile lived in an ivory tower on his commode during a period when the laws forbade anyone to speak indifferent of him.He made costly decisions that lost enormous wealth to the nation of France .Only one man stood up ‘with opinions’ and that was Voltaire and was imprisoned for doing so.A Blasphemy Law for the rich then was used against Voltaire as evidence against him.
Times today resonate the return of more running water .
Whatever you think about the circumstances leading up to this, you have to admire the main character for making a stand. More courage that the entire contents of Kildare Street. Actually I will go further and say more guts than the entire state apparatus (D2). Unlike all the quangoes, this man knows what are his priorities. http://www.independent.ie/national-news/repossession-bid-leads-to-standoff-2275703.html Well somebody has decided to stand up for himself. I don’t know how the debts were incurred. Probably in the midst of the phase of optimism. And in all likelihood the digger will get seized. I reckon we should ask him to deal… Read more »
“Thus for more than 30 years, the world-dominating Anglo-American alliance has been under the sway of factions which, for all their internal squabbling and hair-splitting, are strongly united in their steadfast, unshakeable adherence to the perpetuation — and expansion — of elite power and privilege. They have shown themselves willing — eager — to degrade their own societies (and destroy many others) in the service of this brutal, barbaric, inhuman faith. The poor have no place in this system, which is a retrograde, hi-tech, rhetorically sugarcoated revival of the laissez-faire fantasies of the past, as Jeremy Seabrook notes: “‘Pauperism’ long… Read more »
Sharks are always attracted to utilities because they simply can’t be allowed to fail and that means that the taxpayer will have to ride to the rescue when all value has been stripped out. The ramshackle that is now Eircom, is the perfect case study and only the insane would go along with this proposed fire sale. I would imagine that the multinationals wouldn’t like any move to flog off the ESB – they may be expensive and way over paid, but at least we do get continuity of supply. As for the government and the land/NAMA thing – they’ve… Read more »
Housing over-supply, by county, based on today’s NIRSA report (to be discussed on tonight’s PrimeTime)Visualisation here:
http://manyeyes.alphaworks.ibm.com/manyeyes/visualizations/years-oversupply-of-property-by-co
All Corporations are being run by 35-45 year olds. Ireland is being run by a Green led dictatorship consisting of parish politicians 95% plus over the age of 45. This will not change either as the younger population refuse to vote they see no point in doing so and can you blame them? Our only alternative is Zig FF or Zag FG in power with a tail wagging either one of them. The only way to change this is to create a tail and the tail needs a senior committee of advisors (below)and have a selection panel to select a… Read more »
The very same private fractional reserve banking system which the western people as a whole have bailed out through their unlimited guarantees and inflationary central bank money laundering and killer austerity measures ect., is the same banking system which will extend the leveraged loans to the hedge funds who in turn will take stewardship of our precious assets and then proceed to charge us rent on what unready belongs to us in the first place. A scam , a racket, a swindle, call it what you will, but be sure to know that it couldn’t happen without the witting traitors… Read more »
Consumer confidence is falling, consumer credit is shrinking, and consumer spending is dwindling. Jobs, jobs, jobs; it’s all about jobs. Budget deficits are irrelevant to the man who thinks he might lose his livelihood. All he cares about is bringing home the bacon. Here’s a quote from Yale professor Robert Schiller who was one of the first to predict the dot.com and the housing bubble:
“For me a double-dip is another recession before we’ve healed from this recession … The probability of that kind of double-dip is more than 50 per cent. I actually expect it.”
http://www.counterpunch.org/
Man Bites Dog –
John LAW was an economist and a rogue banker who made killings on those who trusted him .He created the Mississippi Bubble and a Bank and worked in USA , UK and France until he finally had to flee from those he robbed to Venice where he died .His story is a parallel to our discussions on this site.
http://www.google.ie/#q=John+LAW&hl=en&rlz=1W1ADBS_en&prmd=b&tbs=tl:1&tbo=u&ei=N3xSTIPtK4r60wTt_8H_Ag&sa=X&oi=timeline_result&ct=title&resnum=11&ved=0CFEQ5wIwCg&fp=2c58d32dbf267913
Reflections on Mc Dowell : He quoted yesterday at a private audience :
Irish Constitution : ‘Fidelity to the Nation and loyalty to the State are fundamental political duties of all citizens’.
Should we ask ‘are Bankers citizens ?’And lots more ….like Politicians etc ?
re mcdowell,a bit late to be finding religion now,he got elected years ago on “zero tolerance” and we thought we were getting rudy guiliani,the extra guards were never employed and the crime rate soared on his watch.
he deffo shouldn’t be even considered for the new order!
Echoing posts from Tim, Tull and others, here’s some more on NIRSA Report, highly recommended reading, blogged on it here http://bit.ly/9pNPHe
I caught the start of Vincent Brown last night with Kevin Myers in the chair to discuss Irish billionaire debtors hiding their assets behind their wives. As it was past my bedtime I could only watch the first few minutes. Martina Devlin was first up. She wrote this recent article about solicitor-gone-missing Michael Lynn: http://www.independent.ie/opinion/columnists/martina-devlin/martina-devlin-time-to-grab-this-thief-by-his-dirty-white-collar-2267858.html Lynn’s wife successfully used legislation originally brought in to protect abandoned wives to challenge the forfeiture of substantial property which had been seized on behalf of her husband’s creditors. Apparently her husband had cheated her and she didn’t know where he was but it turns… Read more »