National politics and Globalisation of economics

Dirk Gently

Not sure if this falls into the criteria of theory or general political affairs but I’ll let a mod decide.

Not just in Ireland, but generally across the European Union left and right seem to be irrelevant as Governments either embrace liberal free market polices or face a basket case economy due to more competitive markets under cutting any social initiatives sought by political leaders.

Is the national Government now largely restricted to managing an economic situation dictated down to them and largely beyond their control or can Governments still successfully shape the economy of a single state, exclusive of neo liberalism internationally?

To use the example of Ireland and also of our neighbours across the water in the UK there doesn’t seem to be any difference apart from the cosmetic in the approach of the various parties. New Labour / conservative party, who can tell the difference any more. Same here in Ireland, cosmetic differences and populist battle cry’s such as drunk tanks and boot camps are all that separate the government and opposition.

Are direction and ideology dead, and is it just about offering the best deals to the multinationals, under cutting other countries in order to attract investment. Is this approach sustainable as foreign markets inevitably offer cheaper labour costs, less corporate regulation and taxes and limit the benefits of workers and services to society in an effort to woo foreign investment.

How sustainable is Ireland’s effort, regardless of national government? At the moment we are booming on the back of very high credit, strong foreign investment and an inflated building sector. The approach from Labour seems to be to subsidise the building boom and keep prices high. This shows a lack of an alternative in a survival of fittest global economy. Will we in Ireland and indeed across Europe be left with a totally privatised economy, massive debt and high unemployment as the eastern markets inevitably out perform us in attracting the investment.

Is there a national alternative to the straight jacket of neo liberal economics or is it time for national politics to go international in a big way, increasing links and ever increasing canvassing of other national governments to form social and economic alliances in order to change national economies without turning them into economic waste lands.

I am of the view that the national government is only relevant in how it manages / mis-manages a situation cast upon it of which they have no influence and national governments are largely irrelevant in actually meeting the needs of a changing society outside the restrictions of neo liberalism. Apart from a formidable alliance for change with other developed countries what difference can one national government make to it’s citizens? The last I heard of any kind of any new direction was Labour (uk) when they got back into power on the back of their "third way" approach (a comprimise between capitalism and socialism)which turned out to be either just spin or else deemed unworkable as the third way never actually materialised. Is there a third way?

Representative democracy means we elect someone to make decisions on our behalf, but how much room do our representatives really have to manoeuvre without frightening off the real policy makers, i.e. the corporate investors looking for the best place to make the most profit.

Does democracy as in “we the people” exist or is it a case of corporate rules, like it or lump it.

DadaKopf

The way I see it is:

The neoliberal discourse is framed around freedom of the market and 'competitiveness'. This is another way of putting 'business interests trump all others'.

'Competitiveness' is the catchword because what it means is "if we can't satisfy corporate interests, we'll all be in penury". It's scaremongering impregnated with ideology posing as 'common sense'. It's a nice way for companies and governments to shift the blame - to present the economy as something natural, rather than something man-made, which we just must adapt to. It's therefore easy for everyone to forget that the market is just something shaped by powerful people securing their interests.

What we're being asked to do is submit to the power of the transnational capitalist class.

So the issue isn't whether Ireland is helpless in the face of the market, but how can we - or anyone, really - challenge forms of power which create injustice in the world. Why is it that 10% of the world's people own 85% of the world's wealth? What effect is this having on real people's lives across the globe right now?

I am of the view that the national government is only relevant in how it manages / mis-manages a situation ... national governments are largely irrelevant in actually meeting the needs of a changing society outside the restrictions of neo liberalism. ... [W]hat difference can one national government make to it’s citizens?

Through time, every political structure has faced threats and tried to deal with them. Some better than others. But despite Thatcher's oft-used acronym, TINA (There Is No Alternative), developed countries are proving that there is an alternative. For example, Sweden has a GNP greater than the UK - but Sweden has a massive welfare state and has high levels of market interventions. Sweden also usually tops quality of life studies.

In Ireland, I blame weak political leadership. I'm a Labour and Green voter. I don't believe in supporting a redundant FF-FG party structure. But I am aware how weak both are in challenging injustice. Sometimes I think they are apologists for a repugnant system.

Ultimately we have to ask ourselves something very basic. Do we want to live in a market? Or do we want to live in a society?

nesf

DadaKopf wrote:

Ultimately we have to ask ourselves something very basic. Do we want to live in a market? Or do we want to live in a society?

Doesn't every society imply the existence of a market and vice versa? I realise that you probably didn't mean for it to be taken literally but still it is an invalid question to my mind. Wouldn't it be more correct to ask what kind of market we want to have in our society or in what way do we want the market limited in our society?

clown bag wrote:

Not just in Ireland, but generally across the European Union left and right seem to be irrelevant as Governments either embrace liberal free market polices or face a basket case economy due to more competitive markets under cutting any social initiatives sought by political leaders.

I would disagree to be honest with you. I think that what is defined by the left and right is changing in Europe but to say that the division is irrelevant is simply untrue. Also, don't fall into the trap of looking at the free market and only considering the Government. There are far more national players than simply elected officials and sometimes they have more power than the government (look at the strikes in France in recent years).



The markets aren't dominated utterly by the corporations. Markets really aren't that simple. The corporations are as much dominated by the market as anyone else is.

DadaKopf

nesf wrote:

Doesn't every society imply the existence of a market and vice versa? I realise that you probably didn't mean for it to be taken literally but still it is an invalid question to my mind. Wouldn't it be more correct to ask what kind of market we want to have in our society or in what way do we want the market limited in our society?

Yes, I didn't mean for it to be taken so literally. Of course this is precisely what I'm talking about: how can people govern markets and not vice-versa. But it doesn't sount as 'rousing', really, do it?

I'd agree with nesf on the last point, too. Left and right still matter. But politicians, the media, campaign and lobbying groups, are no longer using these terms. It's interesting that so few people know what 'neoliberalism' is, and many tend to think it's a 'loony left' term, when actually it's a very commonly used term in academic literature to describe the dominant political-economic philosophy that now dominates our world. On the other hand, some on the left and right call it 'Empire'.

Very much, the role of 'the left' is in challenging neoliberalism. But, what to replace it with is an open question. The left is still revising its assumption after mistakes, limitations, a changed world.

m1ke

Not just in Ireland, but generally across the European Union left and right seem to be irrelevant as Governments either embrace liberal free market polices or face a basket case economy due to more competitive markets under cutting any social initiatives sought by political leaders.

This is not actually the case in Europe. There are very distinct approaches to the way states participate in competitive markets. On the one hand we have liberal market economies like Ireland and the UK and on the other we have coordinated market economies like Germany and France and the social democratic approaches of the Nordic states. The amount of variety alone in Europe really contradicts the idea of a simple choice between black and white. The idea of powerless states bowing to market pressure is very much a myth.

Is the national Government now largely restricted to managing an economic situation dictated down to them and largely beyond their control or can Governments still successfully shape the economy of a single state, exclusive of neo liberalism internationally?

A government can still very much control and shape the economy. But exclusively of neo liberalism? If a government ever tried to completely opt out of international markets it wouldn't last long in power. However, governments can still shape the economy very much exclusively of international markets! For instance, they can decide on whatever welfare regime they want to pursue. The effect of FDI on government decisions in social welfare, health and taxation is actually not that significant in the developed world. MNCs look for locational advantages and other benefits. They try to shape domestic political choices like any other interest group of course but they are not decisive. The performance of the Nordic countries proves this point - but it is also true in places like Ireland.

To use the example of Ireland and also of our neighbours across the water in the UK there doesn’t seem to be any difference apart from the cosmetic in the approach of the various parties. New Labour / conservative party, who can tell the difference any more. Same here in Ireland, cosmetic differences and populist battle cry’s such as drunk tanks and boot camps are all that separate the government and opposition.

You've picked two states that used to be one state and therefore have very similar ways of doing business relative to the rest of the world. Try looking further afield for answers and you'll see that there are so many differences in the way states interact with markets.

Are direction and ideology dead, and is it just about offering the best deals to the multinationals, under cutting other countries in order to attract investment. Is this approach sustainable as foreign markets inevitably offer cheaper labour costs, less corporate regulation and taxes and limit the benefits of workers and services to society in an effort to woo foreign investment.

Sometimes MNCs don't invest in countries for cheap labour, they invest for other reasons e.g. they need very specialised labour that only advanced economies with high levels of education can supply. MNCs dont just jump in and out of countries, once they invest somewhere, they are tied to that location by much stronger bonds than you'd think. Infact, many governments initially negotiate very sweet deals to bring in MNCs but over time renegotiate much tougher terms. Obviously some countries are always going to be more attractive than others, this is just a fact of life, some locations with certain specific benefits are better for some types of production than others.

How sustainable is Ireland’s effort, regardless of national government? At the moment we are booming on the back of very high credit, strong foreign investment and an inflated building sector. The approach from Labour seems to be to subsidise the building boom and keep prices high. This shows a lack of an alternative in a survival of fittest global economy. Will we in Ireland and indeed across Europe be left with a totally privatised economy, massive debt and high unemployment as the eastern markets inevitably out perform us in attracting the investment.

Ireland's case is really quite extreme in our engagement with internatioanl markets. It's served us quite well but we can still get more. In my opinion we should raise taxes on MNCs as research proves there is no association between corporate tax and FDI (Jensen, 2007). We should therefore try to extract more from our MNCs and use this to further strengthen investment and infrastructure. We do not have a totally privatised economy and I hope we never do. The eircom privatisation was a disaster for instance. We should only have competition in markets that are contestable to begin with.

It is important in this democracy that we demand sensible policies and makesure that governments are not favouring certain interest groups to the detriment of society. The PD/FF coalition has favoured construction industry elites to the greater detriment of society and they should be held accountable for this.

What we're being asked to do is submit to the power of the transnational capitalist class.

The above quote is a complete and total over exaggeration. Empirical evidence shows that democratic states with elected representatives who act on behalf of the public are the key decision-makers in the global economy. It is defeatist sentiment and a lot of the simple black/white why can't we live without the market analysis is an unfortunate cultural discourse.

nesf

DadaKopf wrote:

Yes, I didn't mean for it to be taken so literally. Of course this is precisely what I'm talking about: how can people govern markets and not vice-versa. But it doesn't sount as 'rousing', really, do it?

To me it does, but I like markets and market design which makes me unusual. What it comes down to in my mind is having a bit of cop on about it. The market is the most efficient way of achieving many things, but most definitely not everything. I like the idea of small government where (mostly for public goods) the government steps in and takes over (or heavily regulates) what the market doesn't do well and leaves a market to do the rest (though not necessarily an unregulated one, just not an overly regulated one).

DadaKopf wrote:

I'd agree with nesf on the last point, too. Left and right still matter. But politicians, the media, campaign and lobbying groups, are no longer using these terms. It's interesting that so few people know what 'neoliberalism' is, and many tend to think it's a 'loony left' term, when actually it's a very commonly used term in academic literature to describe the dominant political-economic philosophy that now dominates our world. On the other hand, some on the left and right call it 'Empire'.

Very much, the role of 'the left' is in challenging neoliberalism. But, what to replace it with is an open question. The left is still revising its assumption after mistakes, limitations, a changed world.

I think that both the left and right are (slowly) learning from their mistakes. You can't privatise everything without creating a lot of problems but equally public companies are inefficient for the most part and need to be used sparingly rather than be looked at as a standard and more importantly not as a source of employment in rough times either.

m1ke

To me it does, but I like markets and market design which makes me unusual. What it comes down to in my mind is having a bit of cop on about it. The market is the most efficient way of achieving many things, but most definitely not everything. I like the idea of small government where (mostly for public goods) the government steps in and takes over (or heavily regulates) what the market doesn't do well and leaves a market to do the rest (though not necessarily an unregulated one, just not an overly regulated one).

Countries with absolutely huge governments are often the most liberal in terms of how they engage with the market. Take the US as an example. There is no evidence to suggest small government is better.

I think that both the left and right are (slowly) learning from their mistakes. You can't privatise everything without creating a lot of problems but equally public companies are inefficient for the most part and need to be used sparingly rather than be looked at as a standard and more importantly not as a source of employment in rough times either.

If you privatise an imperfect market with market failures you're going to actually achieve a much worse outcome then through public provision. I don't see any logic behind the idea that we should use public companies sparingly. We should just use them where we have imperfect markets and are unable to eradicate market failures. Furthermore, there are ways of running public companies to make them more efficient yet again. It is still possible to achieve reasonable results through public as opposed to private.

nesf

m1ke wrote:

Countries with absolutely huge governments are often the most liberal in terms of how they engage with the market. Take the US as an example. There is no evidence to suggest small government is better.

I didn't say that small governments were more liberal necessarily, just that I lean towards the idea of smaller governments more than the idea of very large ones personally. I'm still only really forming an opinion on it though rather than have fully fleshed out arguments on it.

m1ke wrote:

If you privatise an imperfect market with market failures you're going to actually achieve a much worse outcome then through public provision. I don't see any logic behind the idea that we should use public companies sparingly. We should just use them where we have imperfect markets and are unable to eradicate market failures.

That's pretty much what I meant by sparingly. Where using a private firm would produce worse outcomes/efficiencies. Apologies for being unclear about it.

DadaKopf

m1ke wrote:

Empirical evidence shows that democratic states with elected representatives who act on behalf of the public are the key decision-makers in the global economy.

If you read any of the link in my post, you'd see (if the theory holds up) public representatives are part of this 'Transnational Capitalist Class'.

I'd like to see this evidence you mention, it sounds very interesting. Have you a source for it?

Dirk Gently

M1ke

All your points are valid and I agree with them, but the real question I'm asking is about balance.

How far are the scales tipped in favour of the needs to corporate entities over the need of society? Of course governments can shape their nations in whatever way they like but how far can they responsibly go if they wish still to attract investment and avoid the economy crashing.

As nesf mentioned there are other forces at play, but even in the example he gave of France, striking was and will be a result of social benefits and safeguards being sacrificed in order to become more "competitive" in attracting investment and kick starting an economy which suffered from being too worker friendly for the market. In effect the market dictated change and the government was and will be forced to adapt to market conditions in the face of strong opposition from the people.

Here in Ireland we rely greatly on foreign investment and as vile as the PD's are I think McDowell called a spade a spade when in his conference speech he talked mainly about the need to prostitute Ireland to these investors in order for us not to go into an economic slump. Even Labour for all their talk of inequality in society, realise that keeping the house prices high is vitally important unless we are to see our economy crash and this is reflected in their 5th commitment where they will subsidise property prices to keep them artificially high. How sustainable and at what point the money will either run out or the housing market collapse anyway I don’t know.

How sustainable is this approach, considering in all likelihood there may well be a slowdown in the property market, leaving us with only foreign investment to buoy the economy?

How flexible can any government be in such a situation when the only way to avoid a slump is to undercut other countries in making Ireland a more attractive option? How long can the standard we are at now be maintained before the compromises start to resemble exploitation grounds such as in Latin America and other less developed places where the role of corporations is seen in their more naked and brutal form.

Is there an alternative to relying on corporate investment, especially in this country where we would sink very fast without it. How many highly skilled graduates are china and India producing these days, and how long before they become the more attractive option for the high tech jobs as well as manual labour?

I just don't think Ireland can keep the game up much longer before the divisions in society widen as a result of wages falling in order to remain competitive while costs of living continue to rise. I really fear we are living on borrowed time as well as borrowed money.

Can we continue in the future to be competitive internationally as well as maintaining wages, benefits and state services at a modest level or are we at the mercy of corporate investors?

nesf

clown bag wrote:

As nesf mentioned there are other forces at play, but even in the example he gave of France, striking was and will be a result of social benefits and safeguards being sacrificed in order to become more "competitive" in attracting investment and kick starting an economy which suffered from being too worker friendly for the market. In effect the market dictated change and the government was and will be forced to adapt to market conditions in the face of strong opposition from the people

Do you really think these were 'sacrifices' at the altar of the market? The student protests last summer were over the introduction of a 2 year contract for under 26 year olds where the company could fire said person but would have to give notice (2 weeks after a month and a month after 6 months employment) but not give a judicial reason for it. After which the contract would become a standard full time contract. Does this sound unreasonable? Or does it sound very like the probation contracts we see here and in other countries? Chirac changed it later to a 1 year duration. French labour laws are very harsh on companies (firing people is very difficult, difficult enough to discourage companies hiring many people).

Dirk Gently

This is my point though. The frenchies were forced to relax the labour laws because they were being under cut by everyone else when trying to attract investment. The market dictated to the government. To what point will we go to remain competitive as it gets tougher and tougher internationally in the near future as new more cost effective markets out do what we would consider reasonable safe guards.

We have the frenchies overly strong safe guards on the one hand, and little or no safe guards in sweat shops in developing countries on the other hand. How do we in Ireland keep our edge and our safe guards against strong competition from developing countries without lowering the standard to match them as they raise their skills to match us.

DadaKopf

clown bag wrote:

How do we in Ireland keep our edge and our safe guards against strong competition from developing countries without lowering the standard to match them as they raise their skills to match us.

So you'd much rather live in a free market than a fair society.

Interesting Fintan O'Toole column in today's Irish Times:

Fintan O'Toole wrote:

Voters deserve a clear choice

One of the great myths of our time is that the old political distinction between right and left has ceased to function. Like most myths, it has some basis in reality, writes Fintan O'Toole .

The end of the Cold War undoubtedly finished the notion of a world that was fundamentally divided between socialism and capitalism.

Political alignments in Europe have shifted in ways which have blurred the old boundaries: Tony Blair, who leads an old socialist party, is, on many economic issues, somewhere to the right of Angela Merkel, who leads an old Christian Democratic party. Old left-wing shibboleths like large-scale nationalisation have become the preserve of a marginal, and politically insignificant, minority.

These changes, however, obscure an obvious fact: the alternatives facing developed societies have seldom been as clear as they are now, and they still break down along left/right lines.

There are two functioning models of the primary relationship between the economy and society. One, the so-called Nordic model, places the fundamental left-wing concern - equality - at its core. The other, the so-called Anglo-Saxon model, emphasises the great concern of the right - freedom. Even when allowances are made for national, cultural and historical differences, there is no doubt that these models are broadly coherent and that they differ from each other. In one, an activist government takes a relatively large amount of taxes and uses it to provide universal social services such as health, education, childcare and public transport. In the other, a more passive government takes relatively smaller amounts of tax and leaves the provision of as many services as possible to the operation of market forces.

The difference between these models is not, as the right likes to argue, that one is more productive than the other. In an overall sense, countries can become rich using either model: the top ten of the most developed countries in the world includes countries which use the Nordic model (Norway, Iceland, Sweden, the Netherlands) and countries in the Anglo-Saxon camp (Ireland, Australia, the United States). Where the models differ most starkly, however, is in the social effects of this wealth - how well it is spread and how many people are excluded from it.

The difference shows up quite consistently on the United Nations Development Programme's Human Poverty Index, which ranks countries at a broadly similar level of wealth according to their levels of poverty and inequality. The rankings for the 18 richest OECD countries are stark. At one end of the scale (with the least poverty and inequality), the top five are all Nordic model countries: Sweden, Norway, the Netherlands, Finland and Denmark. In the middle are countries which operate a "social market" system that is closer to the Nordic than to the Anglo-Saxon model: Germany, Switzerland, Canada, France. At the bottom are the Anglo-Saxon countries: Australia, the UK, the US and Ireland. The only country in this group of rich countries which now ranks below Ireland is a particularly striking case: Italy fell down the rankings during a sustained period of right-wing government.

These rankings were more or less reproduced in last week's Unicef report on the wellbeing of children in rich countries. The children of the Netherlands, Sweden, Denmark and Finland - all Nordic model countries - are best-off. Those of the US and the UK are worst-off. Ireland, in this case, comes out a little better than the classic Anglo-Saxon model countries. Ireland's performance is boosted, however, by inherited cultural factors, especially those relating to personal behaviour and family life. If you look only at the things the State does - health, social protection, education - Ireland is right down there with our Anglo-Saxon cousins. In terms of both material wellbeing and health and safety, Ireland ranks a miserable 19th out of 25.

This kind of evidence is entirely consistent over the last decade, and it could be extended by looking at indicators such as functional illiteracy (Ireland, the UK and the US all share the distinction of having a 20 per cent rate of adult illiteracy) or life expectancy. It seems obvious enough that not only are there different political models, but that they have demonstrably different social effects. There is a real choice between the left and the right and the choice has dramatic consequences for people's lives.

The job of a functioning political system is surely to offer voters that choice. In Ireland's case, one side of the case is more than adequately served. After a decade of Fianna Fáil/Progressive Democrat government, we are firmly in the Anglo-Saxon camp of low taxes, high inequality and - at best - mediocre social services. (This is increasingly acknowledged by those in power: last week, when the Unicef report came out, Brian Lenihan defended Ireland's poor results on the basis that they were better than those of the US and the UK). If the Opposition fails to present a coherent case for the other model, the conclusion that our political system is unable to serve a democracy will be unavoidable.

Dirk Gently

DadaKopf wrote:

So you'd much rather live in a free market than a fair society.

No, I'd much rather live in a fair sustainable society rather than a free market. I'm simply asking how do we achieve this seen as we are so dependant on foreign investment and high property prices to keep the economy going.

nesf

DadaKopf wrote:

So you'd much rather live in a free market than a fair society.

Is fairness absolute equality or is fairness each being rewarded according to their efforts? Is a two tier tax system fair? Should I be taxed over twice as much for every euro I earn over 30,000? Is it fair for a person who earns 60,000 to pay (very loosely) three times as much tax as a person earning 30,000 yet only earn twice as much? Wouldn't them paying twice as much tax be fairer?

DadaKopf

clown bag wrote:

No, I'd much rather live in a fair sustainable society rather than a free market. I'm simply asking how do we achieve this seen as we are so dependant on foreign investment and high property prices to keep the economy going.

Yes, I think we in Ireland could afford the fair society most want if politicians had courage and the electorate had imagination.

Is fairness absolute equality or is fairness each being rewarded according to their efforts? Is a two tier tax system fair? Should I be taxed over twice as much for every euro I earn over 30,000? Is it fair for a person who earns 60,000 to pay (very loosely) three times as much tax as a person earning 30,000 yet only earn twice as much? Wouldn't them paying twice as much tax be fairer?

I dunno, you kinda jumped to an extreme idea of fairness there. And what have these examples got to with 'the market' per se?

nesf

DadaKopf wrote:

I dunno, you kinda jumped to an extreme idea of fairness there. And what have these examples got to with 'the market' per se?

More just something that I've been mulling over quite a bit for the past few days due to all the rhetoric over giving tax breaks to the less well off. I'm finding them difficult questions to answer to be honest.

That and taxes have a lot to do with the market and how it operates in a country.