The video shop in Monaghan town is packed with young men. This is where local people come to go online. There are three banks of computers, all busy. The two lads beside me have their CVs out, trying to send them to as many prospective employers as possible. They’ve both been on the dole since Christmas.
Down the road, outside the town, a young professional man, – a father of four – is contemplating the future after being laid off for the first time in 20 years. The day before, in Ashbourne, three SR Technics workers were chatting about their next moves. These men, with years of experience in aircraft maintenance, were coming to terms with the fact that a company, which was profitable with order books out to 2010,was winding down because of an investment decision made in the Gulf.
Last Friday, in Waterford, at the Waterford Crystal souvenir shop, the workers occupying the premises await their fate. Today is the deadline to accept a compensation package from the new owners. Earlier this week Taoiseach Brian Cowen presented shamrock to US President Barack Obama in a Waterford Crystal bowl. Now it is likely that crystal will never again be manufactured here.
This is Ireland. Unemployment is escalating in every town and suburb. Keeping people in employment should be the number one priority of all economic policy now. This does not mean that budgetary squeezing should be postponed indefinitely, but it is not the immediate overarching concern.
At its most basic, in order to keep unemployment low, we have to accept that all the old rules need to be torn up. Ideas such as shareholder value, the primacy of private capital and minimal state intervention need to be thrown out.
If you doubt this reassessment, listen to what Jack Welch – the poster boy for shareholder value – has to say. He is now arguing, like Alan Greenspan, that the markets sometimes don’t right themselves.
Sometimes, you need to drop old ideas and adopt new ones, and have the confidence to admit that you are not infallible. Obama is doing it with the full backing of Fed Chairman Ben Bernanke.
By having the confidence to meet new challenges with new(sometimes old) ideas, the Americans are showing an extraordinary intellectual vibrancy in the face of economic fragility.
We in Ireland have to do the same; if we want to keep unemployment low, we have to make labour cheap and boost demand.
To do this, we must cut income tax and raise property tax as the central aspect of our revenue strategy. The reason is clear: if we tax work now and make it more expensive, there will be fewer jobs to go around. If we tax property now, we will extract real cash out of this most useless and socially divisive of assets.
The secondary objective of economic policy now should be to create inflation, not deflation, because only by creating inflationary expectations can we wriggle out of the liquidity trap we have set for ourselves. Otherwise, deflation and its handmaiden, crippling debt payments, will generate unprecedented levels of unemployment, emigration and social tensions.
If the state does not control this process, the process will control it. It is pretty simple, really. For this intellectual courage and leadership we must turn to the civil service mandarins who run our country. Where is the TK Whitaker of our generation?
Unfortunately and unforgivably, he does not exist. Our politicians should realise that they will take the blame for the inertia of senior mandarins because we are going down the European route, adopting the economics of 26cHerbert Hoovers when we need the imagination of one FDR.
In Obama, the US has its FDR, whereas all we have are the same old platitudes from the same old people, who don’t seem to be able to analyse the pros and cons of our situation.
The first thing we need to do is to think like a country in a monetary union, not the petrified Ireland of the 1980s with a shaky currency and excessive real interest rates to match. What is there not to understand about monetary union? We have given up control over our interest rates and our exchange rate; in return, we have bought the ability to borrow in downturns without exchange rate risk. We will not run out of money unless they kick us out.
Therefore, we have signed up to an economic pact which is based on the idea that, in recessions, the mechanism for easing the downturn is fiscal policy. This is the logic of the EMU, and is also the deal that Germany and France signed up to. (Realising the economic logic of this, the ECB stuck the 3 per cent budget deficit rule into the Maastricht Treaty.)
But this rule is nonsense, and has been broken wholesale. As was the case in Sweden and Finland in the 1990s, and Britain and the US now, the budget deficits will breach 10 per cent of GDP – and go higher. This reaction is not limited to countries.
A company with financing dilemmas raises money through a rights issue, while at the same time sorting out its internal mess. It doesn’t cap the rights issue, the market does. And despite all the talk, there are no real financing constraints on Ireland now. Sorting out our mess begins with the banks. But here, the omens are not good. The man charged with making the next move with our banks, Peter Bacon, has said that the figure for bad loans may be worse than the banks first suggested. Well, fancy that! The banks lied about their balance sheets? They underestimated their own recklessness? Never!
As this column has been warning for some time now, the bad debts of the Irish banks will be at least €40 billion, and this figure may be conservative. The reason is simple: the main banks went mad between 2005 and 2008, almost doubling their loan books with borrowed money. They lent to everything, particularly property. Now all is in freefall.
Thus, we have to set up a bad bank or asset management company to manage the Irish property portfolio.This is the only way to get monetary policy going again. In the meantime, we should not squeeze the blood out of the economy by raising taxes or cutting sensible spending too much. We need to engage with ideas like work fare, as opposed to welfare. The state should take stakes in businesses like SRTechnics, and these places should be reopened as public private partnerships.
The world has changed dramatically, and we have to change with it. This means abandoning ideas which we regarded as sacred, borrowing in the downturn to pay back in the upswing.
Happen to be a docmuentary on the history channel about Fort Knox. Very interesting indeed, appartently there is $200 billion worth of gold bullion in the secret chambers!! Enough to bail out our economy! However there is a problem…..or two. First of all you have to get by 3 metal fences (monitored by watchtowers)- which may have landmines in between them. Then you have to skip by a possible laser security system, that could be backed up by machine guns coming out of four battery’s. Then if thats not enough, it is also the location of the most powerful United… Read more »
All reasonable stuff. High taxes on labour blunts a nation’s creativity and entrepreneuriship. (whether direct or indirect in the form of high VAT & other duties on normal goods like cars). However, we’ve had high taxes on property too, in the form of stamp duty. Our major bubble creating initiative was to provide tax reliefs on rental income from property. These were huge and encouraged “top up” buying of property to avoid paying tax. I know several compulsive house buyers and their portfolios of over priced interest-only-mortgaged houses are staggering. When we look back at this I’m sure we’ll see… Read more »
David asks “Where is the TK Whitaker of our generation?” and responds “Unfortunately and unforgivably, he does not exist. Our politicians should realise that they will take the blame for the inertia of senior mandarins…..” Inertia is not the word that srpings to mind when thinking of the senior public service. Note that when you talk to civil servants, they blame the politicians and when you talk to politicians, they blame the civil service. So let me just focus on the public service. What is striking is the amount of intrigue, the meaningless reforms and the conmplacency when faced with… Read more »
There obviously a clear difference between the Eu approach and the US approach to handling this economic crisis. Ireland has already borrowed well beyond the 3% limit, but the peer pressure from other EU states to get are spending back under control and show some German fiscal discipline is immense. So our ability to borrow in the downturns without exchange rate risk is hampered by the political consensus of the majority of Eu countries, which are dead against more fiscal is stimulus in the short to medium term. I cant see FF trying anything radical that sits uncomfortably with this… Read more »
“If the state does not control this process, the process will control it. It is pretty simple, really. For this intellectual courage and leadership we must turn to the civil service mandarins who run our country. Where is the TK Whitaker of our generation?” The Department of Finance issued these ‘projections’ for the next 5 years in January – a quick glance at this to anyone with any knowledge of the irish economy and business would see many major holes and assumptions that are ‘wrong’ – look at the unemployment to max at 10%. We have less than 1.8 million… Read more »
Well, the government is currently struggling to maintain our budget deficit at 9.5%, far in excess of the the EU’s 3% and David is insisting we should increase this by having public private partnerships in companies such as SR Technics. “The state should take stakes in businesses like SRTechnics, and these places should be reopened as public private partnerships.” SR Technics is owned by three united arab emirates investors. So by this rationale we should approach them and take a controlling interest in a company employing €4,500 people. How much will this cost? A billion? Two billion? And then we… Read more »
David says” By having the confidence to meet new challenges with new(sometimes old) ideas, the Americans are showing an extraordinary intellectual vibrancy in the face of economic fragility”. The WSJ is not known for outside the box thinking but it came up with an interesting solution for America’s housing surplus. –Offer US Resident status to approved, solvent foreigners who buy houses costing more than certain local thresholds ($100,000) for cash. http://online.wsj.com/article/SB123725421857750565.html I wonder if that would work in Ireland? Perhaps the nation would benefit from half a million hard-working, wealthy Indians and Chinese seeking to escape the overcrowding and family… Read more »
The problem with borrowing to maintain an economy which is uncompetitive is that you still end up with an uncompetitive economy, but with a very big loan to boot!
You must view Ireland as a business. Ireland must do as most small and not so small businesses are doing: cutting wages, cutting costs, trying to find a ‘fit’ which will see it through this difficult time.
David is proposing a crash-and-burn mentality, spend and hope that the world will not only fix itself, but will manage to do this while becoming less competitive than Ireland…
Dream on…
“If the state does not control this process, the process will control it. It is pretty simple, really. For this intellectual courage and leadership we must turn to the civil service mandarins who run our country. Where is the TK Whitaker of our generation?”
Beowulf perhaps? Who cares about the boasting so long as he/she (new ideas folks?) ) would slays dragons, not distractionary water-monsters.
A great landscape of opportunity lies before a decisive maverick now with elements of populist left leanings. Who’s got what it takes to re-draw the battlefield?
David says we ‘need to do this’ and ‘need to do that’ frequently and I’ve no reason to doubt his opinion as he was correct in forecasting the popping of the property bubble. What I would like to know directly is this. Does anyone in power ever listen to David? Have they implemented any of his suggestions? Even one? Does he have an ear with someone of influence? Please be specific. I’m outside Ireland but am appalled with what has happened – I didn’t think the country was THAT corrupt and greedy. I desperately want it to work out for… Read more »
‘There is loads of work everywhere and fewer Irish are willing to work .Nationally , the fields are bare and wanting for seed to be sown and food to be eaten’. So, what is our problem? What is work? When God made man life was great , until woman arrived then everything changed . So, what is work? Work is prayer .It is an humble act of thanksgiving to be alive and to ask for something . We should never stop working because it’s good for the soul. What is work? On this site we define work differently because we… Read more »
Good Morning All, First of all i its good to see such interesting and well written comments. I have been following Davids writings now for some time and agree with most. I have been lucky or unlucky (depends what u think) enough to be invited to the Labour conference this weekend as a observer and was looking for advice, ( Im am to-date not affilated to any party) It would seem to me that while the opposition has been performing well they have yet to come up with a plan or a if in power we will…. statement. So i… Read more »
Please note that this post is a “thinking outside the box” one and I might be slaying some sacred ideas – is it time that we ditched out neutrality and joined NATO? I say this because the benefits might outweight disadvantages economically in two important aspects: 1. it would allow us to develop a hi-tech defence/military industry that would encourage the likes of Intel and other tech industries to stay here – note how Silicon Valley developed – that has its roots in the defence sector. One cannot ignore that. 2. we could lease bases to NATO forces – for… Read more »
Hi David, As always you make some interesting points: > Keeping people in employment should be the number one priority of all economic policy now. Yes, but we have to be careful as to what TYPE of employment. Jobs (at all costs) is not a solution. Public Sector funded jobs are NOT real jobs when we are borrowing to do so. Yes, we need to use public funds to stimulate real job creation. It IS about jobs. And its also about costs, reducing costs, and elsewhere taxing excessives. We need efficiency both in the private and public sectors. > This… Read more »
Folks, There are hundreds of thousands of us who, prior to 1996, borrowed 2.5 times our income to buy a modest home. The banks had RULES back then, and proper “stress-tests” — before their “bonus-for-lending-on-the-books-regardless-how-dodgey”culture kicked in. Having worked as a teacher for 7 years by that time, and attained the dizzying heights of the massive PS salary of £18k, I purchased a little house on a hill for £50k. Six months later, the price-tag was £67.5k and I would not have been ABLE to buy it. Then, this thing called the “Celtic Tiger” supposedly arrived on our shores. I… Read more »
Squealing Parlours with Bacon ( CowenGate ) – The smell of part of the PIIGS blood will be felt in a new wave of mass panic beginning on 2nd April and will peak on 10th .This will be a moment never before experienced in our lifetime and will never again be forgotten .This Moon will be playing a rare tune and a new rhapsody .It’s Rhythm will be Enyanamic, borrowing the Hymm Sheets from an age gone past and recalling the battles of old and the valour that up to now has been buried deep under a political / banking… Read more »
I had the misfortune to be unemployed 4 years ago and the service provided by FAS was a joke-the worst paid jobs that few people want and a a lapsadasical approach from staff.What % of people use this service to find work? and do any of their jobs pay 30,000 or more.Shut this wasteful monolith.
One victim in all of this is the Worker and by that I mean the frontline doers. Teachers, Doctors, Mechanics, Engineers, Salesmen, blocklayers – you name it. I would also include the line managers and other coordinators needed to glue the relevant organisations together. These guys touch things and deal with the man on the street. If you were ever to make a distinction between PS and Private sector, it’s probably that there are far fewer as a proportion of total employed in the PS organisation. You get this feeling of admin everywhere and no doers. As one of the… Read more »
A particular song has come into my mind when surveying these issues over the past week or so. It is Famine by Sinéad O’ Connor: – OK, I want to talk about Ireland Specifically I want to talk about the “famine” About the fact that there never really was one There was no “famine” See Irish people were only allowed to eat potatoes All of the other food Meat fish vegetables Were shipped out of the country under armed guard To England while the Irish people starved And then on the middle of all this They gave us money not… Read more »
Will Fingleton cause the Greens to break the government?
http://www.breakingnews.ie/ireland/eyaumhqlidcw/
How many more log sized straws does it take?
“In Obama, the US has its FDR”
I’m pretty sure Paul Krugman would not agree with this.
Workfare. Here’s an idea that came to me around St Patrick’s Day. Now I borrow others’ ideas extensively and with good reason in that my own tend to be mad, bad or plain stoopid, and this one is no exception. It’s based on the Folklore Commission’s bailiúchán béaloidis in the 30s when school children around the country collected folklore from elderly neighbours. My father wrote it up for his own school because he had good handwriting and I saw the stuff that my uncle wrote for his. As you would expect the resulting folklore was very dull indeed, not to… Read more »
Right on Mikey! In todays NYT Krugman says: ” ..now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing. It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone.” Also in NYT Frank Rich says:”“President Obama may not realize it… Read more »
Coldblow and Malcolm Mclure, all we might end up doing is romanticising about the past. Why can’t we build our own businesses at home? We seem to be doing more of it in the US.
http://www.siliconrepublic.com/news/article/12517/business/irish-firms-win-100m-in-us-export-sales
Fair point, John Q Public. As David suggested, the priority is to create substantial jobs that will impact Ireland’s balance of payments. Analysis of what happened here is important too, but perhaps is best left to the academics.
Banker bailouts, corporate bonuses..uhhh the mask is slipping…
Google Video: The Obama Deception:
http://video.google.com/videoplay?docid=-4838322480963934660&ei=l_DHSYGNKobN-QbJgd3VAQ&q=obama+deception+full+movie&emb=1
David, you’re so right – these guys are behaving like accountants and to them, investment is another country unless there’s a clear line of sight to the end of the journey. As any businessman knows, investment in quality projects will always yield a return at some point in time and time being the only unknown, is ,therefore, the only risk. I seem to remember that back in my student days (had to do basic economics for engineers), anticyclical investment was considered to be the only approach to avoid meltdown in a rapidly slowing economy – listening to our ministers, they… Read more »
Hi David and Bloggers; I would suggest david any solutions of any kind put on the table have to be clear as to which economy in Ireland they are addressing. The Real economy or the Ponzi credit/debt slave economy to which Irelands political and business and economic class sold Ireland out too 15 years ago with the opening up of the ‘easy credit’ tap through anglo irish bank as an offshore op for the city of london and wall street financial oligarchs. Any solutions offered to assist and revitalise a bereft real economy will stand a chance. Any solutions offered… Read more »
@David McWilliams and bloggers; Below follows my attempts at seperating the two, just a taster… Ponzi Credit is a means through which it is made possible to supply purchasing power to the laizy, greedy, avarice, sly, sh1tstirers section to be able to own stuff they hadnt or have not earned the right to buy. This perversion of the credit production system under protection by article 45 of our constitution, provided the main commercial banks of this country and taking up by the 100,000s who borrowed who should not have, has destroyed Irelands celtic tiger export economy, destroyed Irelands economic respect… Read more »
Malcolm, shall we “kick it off now”?
While all of us numb sheep adults may be about to swllow the painful medicine, despite much toil and gnashing of teeth………….. has anyone told the kiddos? 1. €10 will be a lot of pocket money from now on 2. A €5 minimum wage will see you competing with adults of all ages and professions 3. There’s an incoming tax on text messages. Holy Moley!! Redser wrote, about 2 years ago, about the zombie estates and implicitly referred to the so-called middle -class areas (everyones MC these days don’t ya know, its the Bertie dream) and that these areas would… Read more »
They are in the process of shutting down the internet with the coming of Internet 2 Telcos will be required to block certain classes of sites or you’ll have to pay for access thus creating a two tier internet and giving away your Identity also.
So much more easy to manage ad filter dessent.
See MR Rockefeller saying how we’d have been better off without it:
http://www.youtube.com/watch?v=Ct9xzXUQLuY&feature=player_embedded
Ladies and Gentlemen, the elusive “They” are already doing it:
The government supplied “Schools Broadband Initiative” already prohibits access to youtube and similar sites – I am waiting for the day that they prevent me logging in here.
Just a tip: Check out “proxy” before its too late. You have to keep moving, as they track you along the way, but you can get things done.
Kind regards to all.
Folks, fyi: this is the response my browser gives when I click on Josey’s link (while in work, with the broadband provided by government):
The URL you requested has been blocked. URL = video.google.com/videoplay?docid=-4838322480963934660&ei=l_DHSYGNKobN-QbJgd3VAQ&q=obama+deception+full+movie&emb=1
Davi-Again, I’m not sure your use of the word “bordering” is appropriate.
The latest scandal to emerge. http://www.rte.ie/business/2009/0324/tax.html The ‘let’s keep this hush-hush’ policy is really insightful. Even if we had competent politicians running the country, they would have their hands full. The professional sector is oriented towards minimising transparency as much as possible. In fact the professional class seems to think screwing the public is their profession. The lesson from all of this is that you cannot trust the professions. The professions, under the guise of that great oxymoron (contradiction in terms), the “self-regulating industry”, run riot. It is never self-regulating. And it is not an industry, but often more like… Read more »
I am lah-fin :))) rolling with laffter, yeah – I am on a roll with this joke(pardon the pun).
Well spotted.
Tim, your comment was entirely relevant.
I just wonder will we see T-shirts or postcards. A bit like the timber dolls (Matchusckas ?) you see in Moscow and St.Petersburg. People can say that they visited Dublin, done the touristy thing, bought the T-shirt and sent home a postcard.
Do this mean that the country is now officially in the toilet ???
Interesting view from abroad. Nothing new. But it’s a nice overall summary http://www.counterpunch.org/browne02192009.html. Was thinking about the news from the US and their go ahead with pumping 1 Trn of confetti dollars on top of the toxic dept. Markets have risen for now. I’d give it a week or so. My fear is that China will cause a run on the dollar to try and maintain the value of their reserves. If that happens, those printing machines will be working over time. I suppose it is now a case of giving the market time enough to allow banks to lend… Read more »
@bloggers;
Ponzi credit Ireland inc. is a pushover philip, dont confuse this with the real economy ireland… i would suggest you give up the vague assertions as cover and just post transparently…
@bloggers;
ponzi credit Ireland inc traditional market or is it real economy Ireland markets,.. the two are diametrically opposed one feed and feeds and feeds and destroys the other…
@bloggers;
Just offering suggestions philip please don’t spin it any other way,… much obliged….
Fingers is now facing a tough time. His lifelong buddies running INBS might end up for the chop as well. Very similar to the Casey ‘I offered my resignation, but the board turned it down’ (so you can’t get rid of me) episode in Irish Life-Permo. These cronies always stick up for each other. And they have contempt for the rest of the population. Again as I say there is something inherently rotten in the professional sector. Eamon Dunphy said this years ago and it is very true. http://www.irishtimes.com/newspaper/breaking/2009/0324/breaking3.htm When I heard that the new director designate of INBS was… Read more »
Deco – I agree with you.
Malcolm, Thanks for the tip-off; I have downloaded the film to my HD for perusal when I have the time. Most conspiracy theories only survive because they are spun as madness – to answer them in serious fashion would be to dignify them with a response – this has always been the approach of the powerful to the theorist. I am reminded strongly of the Vatican non-reaction to David Yallop. He promised to give all the royalties earned from his book to cancer research if they could disprove anything he had said in the book – the Vatican has not… Read more »
Tim, Consider this. By your logic, why not increase public service pay, indeed why not hire 250K more public servants to twiddle their thumbs, and discretionary spending will increase, all will be well, and jobs will be preserved? The problem is that none of this would be productive, and it would have to be funded by borrowing. Lenders would see through this farce, and would not lend us the money ; the country would be bankrupt in double quick time. With public spending exceeding income by 20 billion this year (and revenues are not going to come back to boom… Read more »
Trust me on this one,Im not making this shit up,here it goes.The Mayor of Limerick say’s we have to accept the fact that Dell could be Quitting Limerick,AND HE SUGGESTS…………….. The Government needs to start a HOUSE building programme to get the Economy going again. OOOOOhhhhhhhhhhhhhh I give up.I hope and pray its the re -building of the Moyross area He is alluding to,because if it’s not somebody collect my car it will be parked up beside The Cliff’s of Moher.
Apologies can we still subscribe to a DMcW posting?
Much obliged
Peter
John Gormless suprised me when he appointed Gerry mc caught-ye.to the infamous board of the Dublin Docklands Authority given that He stood for the PD’s IN the 2002 general election.Gerry you might recall on his appearance on RTE’s Q&A programme told us all that pain needed to be taken by PS workers et al and to prove the validity of his contentions He was prepared to send his wife into exile in Italy for a year to save the Country over 4 million in potential future investments.Hat’s off Gerry and your advisers at KPMG,we need people like you showing us… Read more »
The Government is presently flying kite’s re.income tax for all,a sort of reviving of the old turkey of “no representation without taxation” Sean Ardagh pretty much aluded to this on tonight with Vincenzo de Browned off……..I suppose its alway’s been the case of “more inclusivity in a downturn of the Economy,which is inversely proportional to inclusivity in an upturn of the Economy. I can just see the guys and girls who were flipping burgers in the Galway tent having a loving arm thrown around them now in the hour of need officially welcoming them to the club.I wonder will they… Read more »
Thong’s are getting very tense over at INBS (sorry freudian slip there) Mickey Stickey Fingers has the old golden parachute packed and getting ready for the big jump,I think Linehan will cach him before he jumps,He ‘s only giving him a months head start,oohhhh come onn ye cynics 1 month is virtually an instant to a solicitor like Brianey.Most other Solicitors would squeeze at least three months out of the job.Im dealing with a bunch of cynics on this forum,shamefull I say …shamefull.
This auld recession does wonders for your geography all the same, I mean little did I know that there was an island called Nevis in the Caribbean, but its true and I read that if you wanted to buy shares in AIB through Goodbody stockbrokers at one time,then thats where you were to go.With all the branches they had all over the country,you have to agree that was a bit out of the way.I reckon that’s what caused all the confusion for the Regulator when he was suppose to be investigating the overcharging that time,sure the poor auld devil got… Read more »